As we mentioned yesterday, stocks looked poised for at least a short term bounce as some short term indicators had hit oversold levels plus the indexes were either at or near support levels. We got that today, although it was relatively constrained. The S&P 500 gained 0.61% and the NASDAQ 0.35% as the 8% drop in Apple stung that index in particular. While we don’t talk much about Turkey, after the close the Turkish central bank made a major move, raising interest rates by 4.25%(!) – this is one of the countries that has been causing a lot of issues, and the hope is this type of surge will attract capital inflows into the country. Futures are jumping up by about half a percent as we write this in response to the move.
The Turkish central bank raised its overnight lending rate to 12 percent from 7.75 percent and the overnight borrowing rate to 8 percent from 3.5 percent late Tuesday, in a surprisingly strong move to defend the country’s embattled currency. The lira immediately strengthened to 2.2 to the dollar from 2.253 after the decision. The rate hike was much sharper than expected. Local investors have been selling the lira in favor of foreign currencies, and international investors have been staying away from the Turkish currency, pushing its value down to record lows earlier this week. The cost of Turkey’s debt is also rising alarmingly quickly, with 10-year debt hitting 10.45 percent, its highest since 2010.
There were a few economic reports in the U.S.; most notable durable goods and consumer confidence.
The Conference Board, said its index of consumer attitudes rose to 80.7 from an downwardly revised 77.5 in December. Economists had expected a reading of 78.1. Orders for long-lasting U.S. manufactured goods unexpectedly fell in December as did a gauge of planned business spending on capital goods, which could cast a shadow on an otherwise bright economic outlook. The Commerce Department said durable goods orders dropped 4.3 percent.
On to the charts – as we noted yesterday the S&P 500 in particular was right at a key support area it had bounced off of a few times since October. So far we look like we are in the midst of another one.
Obviously we don’t usually post Turkey charts but here is the ETF for the country, so you can see the damage that has been done in their stock market …but of more concern has been the currency which has been in a bit of freefall this month.
Here is the chart for Apple (AAPL), even though we discussed it yesterday – it is the most followed stock in the market by the average Joe.
Ford (F) reported today and the reaction was muted. Ford Motor posted a higher-than-expected quarterly profit as a strong performance in the No. 2 U.S. automaker’s core North American market offset losses in Europe and South America.
Speaking of well followed stocks, old friend Tesla Motors (TSLA) held up impressively during this selling. While earnings are right around the corner, one area you can find good ideas are stocks that brush off selling during a downdraft – the stock is almost back to recent highs.
We don’t post Bollinger Bands on our charts but for those who use them, this interesting note from SentimenTrader:
We’ve discussed Bollinger Bands several times over the years. The indicator plots volatility bands around a security, usually 2 standard deviations from the 20-day average. After closing within 0.5% of a 52-week high only 3 days ago, the S&P 500 has now closed below its lower Band for the past two days. Remarkably, this has only happened 3 other times since 1928. Two of them led to 1-2 weeks more selling, then multi-month rallies. The other led to an immediate unrelenting rally. The dates were 2/20/46, 6/9/54 and 10/10/79.