Equity Markets Blink, But Remain Resilient-What’s Next? Peruzzi’s Perch Memorial Day Edition
May 26, 2017   //   by Mischler MarCom   //   Equities Market Commentary  

Peruzzi’s Perch-May 26 2017-Memorial Day Edition: Equity Markets Blink But Remain Resilient In Wake of More Presidential Drama

Just when the markets looked ready to crack, along came President Trump’s first overseas trip. The trip to the Middle East and Europe came at the perfect time as it took market focus off of the administration’s follies and back on the economic fundamentals.

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Larry Peruzzi, Managing Director

The FOMC minutes from the May 2-3 meeting on Wednesday showed that the FED seems to be on pace for a June 14 rate hike. The FED dismissed 1Q slower growth and felt that higher broader growth is on the horizon. While the probability a June hike slightly diminished after the release, by week’s end markets had priced in a 92% chance of a 25 bps hike.

The week also saw some retailing firms release earning, and on a whole, traditional retailers continue to lose market share but investors were encouraged by pockets of strength in a few names such as Best Buy (NYSE:BBY),  Home Depot (NYSE:HD), and of course, Amazon (NASDAQ:AMZN).

Crude oil’s 2 week rally rolled over as OPEC’s production cuts were seen as being insufficient. Last Saturday’s news that The United States sealed a multibillion arms deal with Saudi Arabia helped lift defense stocks such as Lockheed Martin (NYSE:LMT), General Dynamics (NYSE:GD) and Boeing (NYSE:BA) to all-time highs’. On the negative side, ISIS seemed to hit new lows in Manchester England and President Trump gave us some awkward moments at the NATO meeting on Thursday; neither was enough to keep the S&P 500 and NASDAQ from hitting new all-time highs. We continue to see institutional money flow into the market, but we also saw an uptick in retail flows entering the market. Overseas the U.K pond hit monthly low versus the Euro and U.S dollar on uncertain election polling numbers and Brazil’s bribery/ Presidential drama continues to amaze us.

Looking ahead to next week, a fair amount of data will be compressed into 4 days due to Monday’s Memorial Day holiday. April Personal Income and Spending, as well as May Conference Board consumer confidence on Tuesday gives us some insight onto the consumer sentiment and strength, while Dallas Fed manufacturing on Tuesday, Chicago Purchasing on Wednesday and May ISM manufacturing data on Thursday  will shed some light on manufacturing activity and health.

The highlight of the week will be on Friday with the release of May’s employment report. The FED has repeatedly stated that the largest factor in determining future rate hikes is the Payrolls numbers. With the long weekend and the Jobs report on Friday (providing we do not see any major news out of Washington),  trading volume will be skewed to the end of the week.

This week we looked at total U.S exchange volume versus the VIX index. It confirmed our belief that spikes in the VIX (May 15 to May 18) provided more trading opportunities as limits and Stops got triggered, and thus trading volumes spiked. This week however, the VIX has dropped back below 10 and trading volumes dropped by approximately 15%. Fed governors William, Brainard, Kaplin , Powel and Harker speak during the week, but investors seem to be locked in on a June 14th hike so we expect little new data from the Fed until then.

With the mid-month sell off followed by the late moth recovery investors have had to digest a lot of data points in trying to determine if we are under or overvalued. The long weekend will be welcomed, but we should not lose sight as to the meaning of the day as we honor the brave men and women who made the ultimate sacrifice.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472 | Cell: 1-617-997-6318

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch March 09 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group

Equity Markets Blink, But Remain Resilient-What’s Next? Peruzzi’s Perch Memorial Day Edition