每日市場點評 --- June 25, 2008

The market finished the FOMC decision day modestly higher. The Dow, dragged by poor performance in aerospace names such as Boeing (down 7%) and United Technologies (down 3%), was basically flat for the session. The Nasdaq, on the other hand, reversed its underperformance during the past two sessions and advanced 1.4% for the session. The biggest news for the day was certainly the Fed decision regarding its monetary policy. As the market had correctly predicted, there was little surprise coming out of the statement following the FOMC meeting. In the statement, the FOMC said that “Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased”, which was essentially repeating what Dr. Bernanke talked about in early June. The Fed went on to say that “The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.” Essentially that means the Fed is trying to keep its option open while keeping a close eye on inflation. Fed officials also discussed their new forecasts for 2008, 2009 and 2010 at the meeting. New outlook for inflation, growth and employment will be revealed by Bernanke in his semi-annual congressional testimony in July.

Other than the Fed decision, we also had some macro economic news this morning. Start with the new home sales data. The figure for May came at a seasonally adjusted annual rate of 512K, down 2.5% from a revised 525K in April. That was in line with what economists were looking for. The median price of a new home dropped 5.7% from a year ago to $231K while inventory of unsold homes rose to 10.9 months of supply in May. In another economic report, durable orders for May came flat after declines of 1% in April and 0.2% in March. Excluding the volatile transportation sector, orders for durable goods fell 0.9%, the first drop in three months. Bookings for non-defense capital goods excluding aircraft, which is an indicator of future business investment, fell 0.8% following a revised 3.1% gain in April.

Technologies and consumer cyclicals were among the biggest winners in today’s session. On the loser’s list, we had names like basic materials and capital goods. The CRB commodity index was off by 0.5% as weaknesses in energies and industrial metals were offset by strengths in agricultures. Crude was earlier lower by as much as $5 following a bearish inventory report. The US dollar was lower against most major currencies following the FOMC decision as traders increasingly bet that there will be no rate hikes in the near future. Currently the odds for a rate hike in Fed’s August meeting are around one third. Treasuries rallied with the yield curve steepened. The VIX index dropped 5% today and the market breath was positive.