For the mid-week ending March 23, 2016, the Dow and S&P 500 are down for the week. Both indexes were negatively affected by the suicide attacks in Brussels. In other news: the Fed may have a rate hike as early as April; existing home sales tumble; and, historic visit to Cuba brings change in sight.
Suicide attacks in Brussels on Tuesday impact markets worldwide. The Brussels airport was hit by twin blasts followed by another explosion in a subway station. At least 30 people were killed with another 230 wounded. The airport was closed until Wednesday while train and subway services were suspended. Stock markets worldwide opened lower but recovered most of their losses by the close. The biggest losers were airlines, airports, and hotels.
The Fed could raise interest rates as early as April. This was a statement made by the Atlanta Federal Reserve President Dennis Lockhart on Monday. The FOMC meets again April 26 and 27. Lockhart said he expects continued job market improvement and increased inflation to meet the 2 percent goal. Richmond Fed President Jeffrey Lacker took a similar stance Monday on inflation saying it will likely meet the Fed’s goal in the coming years. From 2007-2009 inflation has remained sluggish leading to speculation that the economy would enter into a recession. The FOMC said in their policy statement last week that inflation expectations were low.
Existing home sales in the U.S. tumbled. Home sales are a leading indicator for the economy, and this could be a warning sign. Existing home sales dropped -7.1 percent in February to an annual rate of 5.08 million units (the lowest level since November). The housing market has been volatile in recent months exhibiting wide swings; the recent change in mortgage regulations is blamed. The decline has weighed on investor sentiment with the S&P 500 falling on the news.
President Obama concludes his historic visit with Cuban President Raul Castro. After a three-day visit to Cuba, Obama said Monday he remains concerned about the country’s record on human rights. However, there are areas of common interest to negotiate a slow normalization of relations. Prior to the meeting, Castro said publicly that his country remains committed to normalizing relationships which could only happen if Congress ends the decades-old economic blockade. During the news conference, Castro said he would release any political prisoners so long as he was given a list of names. Advancements are being made between the two countries on travel, trade, agriculture and the internet. The two-hour meeting concluded the first day of Obama’s visit.
If you’re trading options, it is suggested trading Put credit spreads for the remainder of the week at 2.0 standard deviations or greater. Expect the price of the SPX to fall within 2003 and 2070 (2 standard deviations) by this Friday.
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