For the most part, the markets on Wednesday were a photocopy of the markets on Tuesday. However, once the FOMC meeting minutes were released at 2PM, the buyers stepped up. The reason was that the FOMC meeting minutes were far more dovish from an interest rate perspective than we were led to believe by the commentary Janet Yellen provided, during her press conference three weeks ago, just after the meeting was actually held. In the fullness of time, we have come to realize that Yellen was inexperienced at the game. That is sure to improve over time. I recall Ben Bernanke having to learn the ropes as well early in his tenure as FOMC Chairman.
If we look at the videotape, and cut through all the bull poop, it is apparent that the recent tech and high growth sell-off likely had its roots in Yellen’s original comments. The green shoots of the last two days were sprinkled with high potency fertilizer today and the same stocks that were hated in the last week were loved once again on Wednesday.
More IPOs Priced
The Zoe’s Kitchen (ZOES) IPO was not priced Wednesday but should likely do so today. I would not pay more that $21 for ZOES in the post-IPO after market. Ally Financial (ALLY) did price its IPO at the bottom of the expected range. Blackstone (BX) launched its IPO for La Quinta Holdings (LQ), a hotel chain. The stock traded below the IPO price but closed above. As long as the market can continue to absorb the IPOs coming off of Wall Street’s conveyor belt of deals, the market will be strong. Once the market begins to reject deal en masse, we could be in trouble. I do not expect that to occur in the foreseeable future.
Risk is Back On
So after a solid follow through yesterday, the market is starting to get back its mojo. With the FOMC on the side of the bulls – both credit and equity – we are poised to make another run at highs for the S&P 500 (SPX) and Dow Jones Industrials (INDU). The offense is back on the field and it looks like they want to control the ball once again.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long BX — although positions can change at any time.
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