Market Data Mostly Good Wednesday but FOMC Minutes Threaten

The key to today’s trading is whatever revelations may come from the release of the Federal Open Market Committee (FOMC) meeting minutes this afternoon at 2:00 PM ET. You will recall that it was the last FOMC meeting and follow up press conference by Ben Bernanke that shook stocks to their core and started a downslide. Otherwise, the day’s economic data was mostly positive, with a sharp draw seen in crude oil stocks and wholesale sales outpacing inventories. Mortgage activity declined, but it is difficult to separate the impact of interest rates from the impact of the holiday. If you find this report useful, follow our column.

Market ETF	July 10, 2013	Year-to-Date
SPDR S&P 500 (NYSE: SPY)	-0.2%	+15.7%
SPDR Dow Jones (NYSE: DIA)	-0.1%	+16.7%
PowerShares (Nasdaq: QQQ)	+0.2%	+12.5%

Economic Events

ECONOMIC REPORT SCHEDULE
Economic Data Point	Prior Period	Expected	Actual
WEDNESDAY
FOMC Meeting Minutes
Bernanke Speech
Wholesale Trade (Inventories)	-0.1% (R)	+0.3%	-0.5%
Mortgage Activity	-11.7%	NA	-4.0%
EIA Petroleum Status	-10.3 M Barrels	NA	-9.9 M Barrels
-Gasoline			-2.6 M Barrels

The FOMC Meeting Minutes might show something the market does not want to see when they are released later this afternoon. There is some question about the state of the U.S. economy today. The second quarter is already being written off as a disappointment, but optimists, including those in the Federal Reserve, still see solid GDP growth for the full year. Call them dreamers, as I often do, but this view is what has dictated their plan to taper away asset purchases starting this year and running into next year. In my view, this is a mistaken path that will likely severely damage what history has to say about this Federal Reserve. History will have a lot to say about it, I’m sure, but let’s hope there is no new revelation from the FOMC that might disturb stocks today. Given the brunt of the blow was square on, you would expect the memory to only bruise a bit.

Federal Reserve Chairman Bernanke just so happens to be giving a speech today at 4:00 PM, unrelated to the minutes release. While he often offers a note of sobriety and usually smoothes over concern, the last time he delivered an important speech, he completely undermined the market with a surprise statement not found in any of the Fed’s printed material. That, of course, was his tapering statement, confirming the market’s worst fear, that the Fed was abandoning its extra efforts for businesses and real estate. Long interest rates skyrocketed and there is some evidence of impact to small business and the real estate sector as a result. Bernanke’s speech today is on the history of Federal Reserve policy, so he is almost certain to discuss his Fed’s novel asset purchase activity.

Mortgage activity declined again in the week ending July 5, but it’s difficult to separate the impact of relatively higher mortgage rates (versus several months ago) from the impact of the holiday. Over recent weeks, we have seen this data impacted significantly by sharply spiking mortgage rates. However, over recent years, we’ve seen this data vary significantly around holiday weekends. Mortgage rates have started to settle back, so there is hope that a cruising speed might be maintained in housing. However, the FOMC meeting minutes might offer a painful reminder to the bond market later this afternoon and help mortgage rates higher as well. So, it’s a wait and see approach here. The Mortgage Bankers Association’s data showed decline in both the Refinance Index (-4.0%) and the Purchase Index (-3.0%). Illustrating the difficulty in adjusting this data for the holiday, we note that the unadjusted Purchase Index declined by 23%. The iShares Dow Jones US Real Estate (NYSE: IYR) was lower by about a half of a point Wednesday.

The Wholesale Trade data for the month of May offered depressing data on the headline number, but let’s look closer. Wholesale inventories declined by 0.5% in May, and wholesale inventories for April were revised lower from a 0.2% increase when initially reported to a 0.1% decline upon revision. The drop is important, but it is especially telling if wholesale sales also declined. On that front, wholesale sales were up 1.6%, on strength in durable goods sales and especially motor vehicle sales. So, we should not read negatively into the decline in inventories, as it appears to have been driven by strong sales. The inventory-to-sales ratio dropped to 1.18 from 1.21 in April, which is good news for industrial stocks.

The Petroleum Status Report showed another sharp weekly decline in crude oil inventories today. Two straight weeks of severe drawdown in inventory is very bullish for the energy sector. The iPath S&P GSCI Crude Oil TR Index (NYSE: OIL) was up 1.7% in sympathy with the commodity’s spike on the news. U.S. benchmark crude oil was at its highest price in over a year today.

International Markets

EUROPE	10:49 AM ET	ASIA/PACIFIC	CLOSE
EURO STOXX 50	-0.3%	NIKKEI 225	-0.4%
German DAX	-0.15%	Hang Seng	+1.1%
CAC 40	-0.2%	S&P/ASX 200	+0.4%
FTSE 100	-0.2%	Korean KOSPI	-0.3%
Greek ASE	-2.2%	BSE India SENSEX	-0.7%

Greek shares are looking sharply lower today, as they have become trading plays around news. After Greece was cleared for its latest aid tranche from its EU partners, Greek shares gained.

Commodity Markets (10:46 AM ET)

WTI Crude	+2.0%
Brent Crude	+0.4%
NYMEX Natural Gas	+1.6%
RBOB Gasoline	+1.2%
Gold Spot	+0.8%
Silver Spot	+0.2%
COMEX Copper	+0.9%
CBOT Corn	+0.1%
CBOT Wheat	-0.6%
CBOT Soybeans	+1.0%
ICE Cocoa	-0.1%
ICE Sugar	+0.3%
ICE Orange Juice Conc.	-1.4%
CME Live Cattle	+0.0%

Corporate Events

REPORTING EARNINGS
Company	Ticker
WEDNESDAY
MSC Industrial Direct	NYSE: MSM
Family Dollar	NYSE: FDO
American Greetings	NYSE: AM
Fastenal	Nasdaq: FAST
Texas Industries	NYSE: TXI
Materials Sciences	Nasdaq: MASC
Synergy Resources	Nasdaq: SYRG
Cleco	NYSE: CNL
Premier Exhibitions	Nasdaq: PRXI
PriceSmart	Nasdaq: PSMT
VOXX International	Nasdaq: VOXX

MOST ACTIVE STOCKS
BIGGEST GAINERS	% Gain
Inovio Pharmaceuticals (NYSE: INO)	+20%
Neonode (Nasdaq: NEON)	+18%
Spherix (Nasdaq: SPEX)	+16%
Skystar BioPharmaceuticals (Nasdaq: SKBI)	+14%
Prima Biomed (Nasdaq: PBMD)	+19%
Pharmacyclics (Nasdaq: PCYC)	+14%
Stemline Therapeutics (Nasdaq: STML)	+13%
Nu Skin Enterprises (NYSE: NUS)	+12%
China Automotive (Nasdaq: CAAS)	+12%
HyperDynamics (NYSE: HDY)	+12%
BIGGEST LOSERS	% Drop
NeoGenomics (NYSE: NEO)	-16%
VelocityShares 3X Long Brent (Nasdaq: UOIL)	-13%
Bear Stearns Depositor (NYSE: TZF)	-10%
TRC Cos. (NYSE: TRR)	-8%
Arrhythmia Research (NYSE: HRT)	-10%
Pingtan Marine (NYSE: PME)	-11%
Vimicro International (Nasdaq: VIMC)	-10%
Bioanalytical Systems (Nasdaq: BASI)	-8%
Rackspace Hosting (NYSE: RAX)	-7%
China Recycling Energy (Nasdaq: CREG)	-6%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.