Although the Fed maintained its hawkish tone and shrugged off recent economic weakness as temporary, the market reacted in a favorable manner. The volatility on the news was quite limited but Apple (AAPL) did what was anticipated as well. The stock bounced back from some early weakness but failed to stay positive.
Even with the bounces, it was not a great day for the indices. The DJIA squeaked out a gain but small-caps lagged again and breadth was close to 2-to-1 negative. The number of new 12-month highs fell to around 300 while new 12-month lows exceeded 100.
What is really saving the market is the suppressed volatility. There just isn't much movement to stir up stronger emotions. There is no reason to be greedy or fearful when the S&P 500 barely has a pulse. The action in small-caps is looking poor but it isn't gaining any major traction so far. Why worry when the S&P 500 has closed within seven points of the same level for seven straight days?
Earnings tonight from Facebook (FB) and Tesla (TSLA) will provide something of interest, but human traders are growing weary of the way this market trades. It has not been offering much of interest despite the news stories constantly repeated in the media. (Apple and Facebook are part of TheStreet's Action Alerts PLUS portfolio.)
The initial reaction to Tesla's report is negative, but as with Apple, it is likely that dip buyers are lurking and waiting for the opportunity to catch another run. Facebook's EPS number looks light but there is some confusion as they are no longer reporting non-GAAP EPS. The stock is trading down on the number, but again there is likely to be buying interest on a pullback.
Overall, the market is still holding up but the cracks in the foundation are growing. The Fed announcement today was premised on the idea that recent economic weakness was just a brief pause. If that is not the case, the market is going to be very vulnerable.
Have a good evening. I'll see you tomorrow.