We cringed last month when we read the FOMC’s September 21 meeting minutes, specifically the part where the committee said stresses “in European financial markets remained broadly contained,” but bore watching.
It was the first time, as far as we could tell, that they’d used the term “contained” in that context since the committee’s infamous assessment that the subprime-mortgage turmoil back in early 2007 was “relatively well contained.”
Well, we know how that worked out, right? Not contained…at all.
And neither are the stresses in European financial markets, as it turns out. In fact, it’s looking anything but contained at this point, as fears of contagion from Ireland increase.
The lesson here, of course: When the Fed says something appears “contained,” run the other way.
Notice that in the FOMC minutes released today from the meeting earlier this month, the committee doesn’t say any thing’s “contained.” They actually don’t mention much about Europe, except to say that sovereign-debt spreads had either declined or were little changed — except in Ireland, where “spreads moved higher on concerns over the fiscal burdens associated with losses in the Irish banking sector.”
Sweeping Republican victory last night in the House comes as no surprise to US markets, which essentially priced this event in during the preceding weeks. Next up, another event that’s been well-telegraphed and adequately priced into equity markets — the FOMC’s expected QE2 announcement in its communique due around 2:15pm ET.
With some predictions for an asset-buying program running north of $2 trillion, it’s hard to see the Fed satisfying expectations enough to keep up this QE rally’s momentum. ADP’s gauge on Oct private payrolls due at 8:15am; ISM Oct non-manufacturing index, Sept factory orders both set for 10:00am. Oct auto sales also due today.
Euro well above $1.40, dollar index a shade lower. S&P futures up a point; 10-yr note higher,
yield at 2.56%.
Investors aren’t waiting for the Fed decision. There was enough bad news today for them to start the selling early. The DJIA was down about 150 earlier, now down 85. We’ll see if the market decides to turn the FOMC statement into a buying opportunity, or a selling opportunity.
You didn’t miss much between Friday’s afternoon buying spree and this morning. In times of trouble, the market looks to the Federal Reserve to come to the rescue, to fix all the problems, to exercise its infamous put.
It’s like they’re the Super Friends or something.
The jobs report was so bad that the stock market’s convinced the Fed’s going to do something at tomorrow’s FOMC meeting. It is now obvious to just about everybody that the recovery phase of the recovery is over, and there was less recovery than lingering problems. Uncle Sam didn’t fix enough things for all the money he blew through, and now it’s time for, well, something.
The stock market is pricing in action; that’s what Friday’s late rally was about, and that’s what today’s gains are about, here and abroad. The market does this from time to time; by piling so many bets on one number on that roulette table, the markets are trying to force the Fed into doing their bidding, by setting up a very ugly sell-off should the central bank assets its independence.
If the Fed doesn’t do anything, if they issue one of their famous one-the-one-hand, on-the-other-hand statements but don’t implement some new program, I think the stock market will take that very badly. If, on the other hand, they do start some new asset-buying program, “QE Light,” I’ve heard it called, you may get a rally tomorrow.
The problem, of course, is how long it can last, because when the Fed’s actions can reasonably be described as a Hail Mary pass, well, that’s a pretty bad sign right there.
Abundant supply of US economic data for investors to sink their teeth into this week, along with an FOMC meeting to add a dash of intrigue.
This morning brings NY Fed’s March Empire State Survey at 8:30am; February industrial production & capacity utilization at 9:15am; and homebuilders March sentiment index set for 1:00pm.
US dollar is looking livelier after a sharp retreat Friday. Comments from Moody’s regarding the US, UK, France and Germany getting their finances in order have helped pressure the euro and boost the buck. US dollar index recently at 80.15.
Stocks mostly lower in Asia overnight, moderately lower now in Europe. S&P futures down 3.30; 10-yr a bit higher, yield at 3.69%.
Slightly softer premarket tone for US stocks, with the morning’s most notable feature being a conspicuous strength in the US dollar index, up 0.6% at 76.85.
Two-day FOMC meeting gets underway today, statement will come tomorrow afternoon. November PPI, NY Fed’s December Empire State manufacturing survey both due at 8:30am; Nov industrial production & capacity utilization set for 9:15am; homebuilders Dec sentiment index at 1:00pm ET.
Best Buy’s 3Q net quarduples from a year ago, but shares fell premarket as consumer-electronics seller sees 4Q gross profit below prior views.
S&P futures down 3.80; 10-yr flat, yield at 3.55%.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
You can’t lie to the Internal Revenue Service. But can the IRS lie to you? Congress spent much of the day grilling IRS officials for the revelations that came out last week that the IRS was targeting conservative groups. And some lawmakers didn’t like the answers they were getting and accused IRS officials of lying. […]
