Banker’s Remarks Roil Markets, but Buyers Respond

In a surprising show of optimism, buyers snapped up U.S. stocks at midday Thursday after digesting the Fed meeting minutes and comments from Philadelphia Fed President Patrick Harker. Harker commented that he didn’t see the case for further rate cuts and easing efforts. Harker’s comments followed in the wake of a tweet from German Chancellor Angela Merkel assuring markets that the Eurozone would find a way to make the Brexit backstop agreement work. Shortly after Harker’s comments, the market responded by shedding all of the week’s gains in the hour that followed.

Merkel’s tweet that they would work to find a solution to the backstop by Oct. 31 sent the euro sharply lower in relation to the British pound. It appears the market thinks that Merkel’s determination to solve this puzzle is bad for the euro but good for the pound. The influence was not limited to that currency pair alone, however, as oil traders took a cue from the remarks and coincidentally sold off crude futures by 2% (see chart below). Curious traders will likely look to benefit from any 2% longer-term impact of Brexit talk on oil markets over the weeks ahead.

Despite the short-lived drop in market indexes, buyers began bidding stocks higher and continued to do so throughout the day, bringing the S&P 500 into positive territory by the final hour of trading. This kind of response following yesterday’s publication of the Fed meeting minutes is surprisingly bullish considering that many market watchers thought the market had priced in several rate cuts, which may no longer transpire.

Though market indexes rebounded most of the way from the early morning session sell-off that followed Fed-related comments, not all stocks rebounded so well. Observing the FAANG stocks uncovers a surprising insight that Facebook, Inc. (FB) got left in the dust by the day’s action. Investors may become curious about why traders didn’t buy up shares of Facebook nearly as enthusiastically as shares for Apple Inc. (AAPL), Netflix, Inc. (NFLX), Alphabet Inc. (GOOG), and Amazon.com, Inc. (AMZN). 

Traders may be tipping their hand that they expect Facebook’s weakness to continue in the days to come, but regardless of the reason, investors didn’t disagree. They failed to buy up the stock leaving a subtle discrepancy between Facebook and the other highly visible tech shares.  

Not long ago, The Boeing Company (BA) faced some difficult news regarding the fate and future production of its 737 MAX planes. This new model was expected to be a source of significant revenue for the company in years to come. Nervous investors hearing the news of airline crashes that may, or may not, be attributable to the manufacturer, released some or all of their shares, cutting the price by 25% during 2019. 

The past two days’ trading have shown a surprising degree of demand for the company’s shares (see chart below). The rate of change, marked in the lower portion of the chart, shows that the indicator has begun making a series of higher lows even while the price itself is making lower lows. Technical analysts consider this a bullish sign, as it tends to mark both short-term and long-term turning points in the stock. 

Large-cap stocks increased in volatility as they fell in response to comments from Philadelphia Fed President Harker and Angela Merkel. Buyers stepped in to put the indexes in positive territory by the session’s end. Some stocks fared better than others, with Facebook showing notable weakness among the FAANGs. The price action for Boeing shares seems to indicate that investors have become interested in the stock again. 

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