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Market Lab Report - Premarket Pulse 5/19/16

Major averages closed roughly midbar yesterday, finishing flat to higher on lower volume. Both the NASDAQ Composite and the S&P 500 Index found support along recent lows in the 2710 and 2040 price regions, respectively.

The market yo-yo'd around after the Fed minutes were released at 2:00 p.m. EDT yesterday. Most of the Federal Reserve’s members are ready to lift interest rates in June if the economy shows life. Markets initially fell sharply on the news but then rallied as higher rates are indicative of a healing economy, though the painted numbers remain suspect. Also, the aggressive stance taken by the Fed removes some of the uncertainty, and markets have a strong dislike for uncertainty. Still, this could be more jawboning by members of the Fed to give the appearance they are taking an active stance. Yellen has attested to the ailing global economy which must heal before the Fed hikes rates again. 

“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2% objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June,” the minutes read.

With the recent jump in CPI, this increases the odds the Fed may hike at their next meeting that takes place in June. Indeed, Fed futures show the odds of a rate hike in June jumped from 15% to 34%. And the odds of a rate hike of at least 50% is now predicted for the meeting in July instead of in November.

Beauty retailer Ulta Salons & Fragrances (ULTA) had a pocket pivot. Earnings are accelerating, ROE 23.8%, group rank 9. It is currently trading in a tight channel.

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