10/11 Does the Fed want stocks to rise or fall?

Administrator - Sunday, 11 October 2015 09:33

Does the Fed want stocks to rise or fall?

It often appears that no matter what the Federal Reserve does, its actions are destined to draw the ire of market participants.

Now, it appears that what it doesn’t do is at least as likely to ruffle feathers.

The recently released minutes to the Fed’s September meeting showed the committee fretting about the sharp drop stocks had suffered over the past month. It was mentioned as a negative in the economic outlook prepared by the committee staff, and factored into the policymakers’ economic outlook.

Those factors, along with several others, are widely seen as keeping the central bank from meting out its first rate hike in almost a decade.

“The growing debacle surrounding the election of a new Republican House Speaker and the potential crisis if Congress doesn’t raise the debt ceiling within the next month are additional risks that have sprung up in the past couple of weeks,” Capital Economics said in a research note last week. “Accordingly, we now expect the Fed to wait until early 2016 before beginning to raise interest rates.”

However, the Fed’s emphasis on downside risks is injecting a degree of uncertainty—and volatility—into markets, a factor not lost on global policymakers that are calling on the Fed to end its handwringing and begin the tightening cycle.

“In the United States, equity prices fall, on balance, amid significant volatility, and risk spreads for businesses widened,” the Fed minutes note. “Many participants judged that the effects of these developments on domestic economic activity were likely to be small, but they acknowledged the risk that they might restrain U.S. economic growth somewhat.”

The minutes go on to state that the stock drop was not a primary factor behind the Fed’s widely anticipated decision to keep its interest rate target on hold.


Administrator - Saturday, 10 October 2015 06:36

Wall Street readies for earnings, volatility

As third-quarter earnings season gets underway next week, traders are bracing for more volatility in a range-bound market.

“I think we’re going to range trade from here until we get (clarity on economic growth),” said Mustafa Sagun, chief investment officer of Principal Global Equities. “Everyone’s expecting a fourth-quarter rally, yet if it’s not supported by earnings, that year-end rally will come in a very volatile way.”

“Guidance will matter more than what the earnings do,” he said.

Many analysts say the earnings reports are critical for fourth-quarter gains in stocks and finding clarity on the severity of an economic slowdown, especially amid mixed messages from the Federal Reserve.


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8/30 Jobs report could prevent rate hike — but unlikely to ensure one

Administrator - Sunday, 30 August 2015 05:12

Jobs report could prevent rate hike — but unlikely to ensure one


A jobs report less than a month before a key Federal Reserve interest-rate decision is always a big deal, but the looming report on August payrolls probably can only move sentiment by central bankers in one direction.

That’s because the Fed, in official pronouncements, public speeches and interviews, has spelled out the conditions for lifting rates.

One is confidence (theirs) that inflation will return to its target. The other is for “some further improvement” in the jobs market.

Heading into the jobs report that will come out on Friday, it’s really the first sentence that is a mystery. Jobs growth already has been pretty good — averaging 212,000 new jobs each month this year. The unemployment rate has dropped all the way to 5.3% from a peak of 10% in 2009.

Inflation, on the other hand, is way below the Fed’s target of 2%-per-year growth for the PCE price index. In July, inflation by that measure was just 0.3%, and it’s been below target for the last three years.

There are alternative inflation measures where the miss isn’t so large, though still apparent. So-called core PCE — which excludes volatile energy and food prices — grew 1.2% in the 12 months ending July. What’s called trimmed mean PCE — an inflation measure where both the hottest and coldest price moves are removed — grew at a 1.6% clip in July, the Dallas Fed reported.

And neither of those indicators reflect the moves from export giant China in August to devalue its currency.

Inside the Fed, there’s a big debate about the direction of prices. In his interview with CNBC on Friday, Fed Vice Chairman Stanley Fischer said his confidence that inflation would return to target was “pretty high.” On the same network on the same day, Minneapolis Fed President Narayana Kocherlakota said the inflation outlook was so weak that an easing of policy should be considered.

All of which is to say is that the jobs report, short of a barnstorming number for either the headline, or for average worker earnings, isn’t likely to upgrade the Fed’s perspective of the labor market. But a bad number, by contrast, could lend credence to the camp who want to wait a bit longer before lifting interest rates.

Credit Suisse’s economists, for instance, are forecasting 180,000 jobs were added during the month.

“A payroll gain in line with our forecast probably would meet the FOMC’s ‘some further improvement’ criterion for a potential rate hike, especially if other data in the employment report also point to diminishing labor market slack,” their economists said in a research note.

The U.S. economics calendar will be full even without the jobs data.

Key releases will include the Institute for Supply Management’s manufacturing gauge, car sales, the Beige Book and trade data, and there will be speeches from Boston Fed President Eric Rosengren (a dove on interest rates) and Richmond Fed President Jeffrey Lacker (a hawk).


ScreenHunter_554 Aug. 30 17.09
ScreenHunter_555 Aug. 30 17.09


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8/26 Wall Street set for higher open, Dow futures up 275

Administrator - Wednesday, 26 August 2015 07:14

Wall Street set for higher open, Dow futures up 275
U.S. stock index futures pointed to a sharply higher open on Wednesday after a highly-volatile session for China’s Shanghai Composite, with investors left largely unimpressed by the stimulus measures from the People’s Bank of China.

Investors are finding it difficult to know which direction to turn, with global indices flipping wildly between gains and losses after brutal selling seen at the start of the week. China’s benchmark Shanghai Composite finished down 1.3 percent after fluctuating throughout the day.


Experts: Here’s what happened on Tuesday

In the waning hours of Tuesday’s trading session, U.S. stocks not only gave back their gains, but ended down about 1 percent across the board amid overwhelming uncertainty about what would happen in China trading, two experts said Wednesday.

“What we saw yesterday was concern about how Asia would respond … to the rate reduction by the PBoC [People’s Bank of China],” Charles Campbell, executive director at MKM Partners, said in a CNBC “Squawk Box” interview.

U.S. equities recorded their worst reversal since October 2008, with the Dow Jones industrial average closing about 200 points lower after trading as much as 441 points higher.


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