You can almost smell a blow-off rally brewing. With almost all of the bad news on the table, stocks refuse to go down.
Last week new home sales fell 10.5%, well below forecasts. This report led investors to believe that the economy was weakening, and the Fed would stop raising rates sooner rather than latter. The February report on new home sales was the largest decline since April 1997.
For some reason, the market is under the illusion that after the last rate hike, the Fed will reverse course, and begin lowering rates. As reality begins to catch up with investor's illusions, the market will begin its decline in earnest. The Fed Funds futures are currently factoring in at least a 5% fed funds rate, and 5% begins to spark a real competition between stocks and bonds.
Today, the market was basically on hold as investors wait and see what will be said after the Fed meeting tomorrow. The Fed is expected to raise the key leading rates another quarter of a point.
Another drag on the markets today continues to be high energy prices. Crude oil continues to hover around the $64/ barrel mark, and a gallon of unleaded gasoline is averaging $2.56 across the nation. This is not good news for consumer discretionary stocks.
Interest rate sensitive sectors like Banks and Utilities were under pressure today, and precious metals and mining stocks rose as silver hit a 22 year high. I don't know how that could happen, because the government keeps telling us that inflation is not a problem. In addition to silver, copper and zinc rose to record highs.
All and all, it was another dull day.
DJIA: 11250.11, down 29.86
S&P 500: 1301.61, down 1.34
NASDAQ: 2315.60, up 2.80
