Stocks rebounded from Tuesday's drubbing, but not nearly enough to erase the damage done, a classic dead cat bounce.
News was heavy, most of it coming out of Washington, where President Donald Trump reportedly reached agreement with congressional democrats on not only a debt ceiling increase but funding for hurricane Harvey victims and at least the outline of a continuing resolution. The proposed legislative deal would fund the government through December 15, upsetting - only in Washington - Republicans, who hoped for a longer debate on all of the issues.
Obviously, Trump has determined that with friends like his fellow Republicans in congress, he doesn't need enemies, thus making compromises with Democrats. It's actually - for a fellow who's supposedly not a politician - pretty smart politics. Republicans, included Senate majority leader, Mitch McConnell and House leader, Paul Ryan, were reportedly angered over the development.
Wall Street was immediately impressed, though stocks tailed off noticeably into the close.
Trump also tamped down recent bellicosity toward North Korea, hoping that China would do more to keep leader Kim Jong-un on a short leash.
Federal Reserve vice-chairman, Stanley Fischer announced that he would retire from his position on October 13, a surprise leaving open one of the most prestigious seats in Washington and a puzzler for Fed watchers. Fischer cited personal reasons for his decision, but speculation is that the departure has more to do with health than money, but suspect that Janet Yellen will be out at the culmination of her term in February.
Hurricane Irma continued to barrel towards Florida, the Fed's beige book revealed that members thought the economy was showing signs of improvement, though the continuing bemoaning over a lack of inflation was prominent.
While stocks improved modestly, the effect was greater on fixed income and precious metals. Gold and silver halted their recent advances and bond yields rose, with the 10-year note increasing to 2.11%
Overall, nothing was settled, except that Washington might actually avoid the drama that usually surrounds debt ceiling and budget debates, which is actually quite a positive development.
Trump making deals? Who knew?
At the Close, 9/6/17:
Dow: 21,807.64, +54.33 (+0.25%)
NASDAQ: 6,393.31, +17.74 (+0.28%)
S&P 500: 2,465.54, +7.69 (+0.31%)
NYSE Composite: 11,872.92, +45.77 (+0.39%)
Showing posts with label Stanley Fischer. Show all posts
Showing posts with label Stanley Fischer. Show all posts
Wednesday, September 6, 2017
Tuesday, June 27, 2017
Fake News, Fake Markets, Fake Money: Big Losses As Central Bankers Talk Tightening
Good luck to anyone trying to do fundamental analysis in this market.
Jawboning by Fed officials and today, especially, the grand liar of Europe, Mario Draghi, led the assault on spec stocks and the market in general by threatening to take away the low interest rate punchbowl.
Draghi's comments came at an economic conference in Portugal, ECB President Mario Draghi said that as economic prospects improve in Europe, the ECB could make adjustments to its policies of sub-zero interest rates coupled with huge bond purchases.
As if that wasn't enough, a trio of Federal Reserve loudmouths set their jaws to yapping about asset values, cueing a collapse in the equity and bond markets.
Fed Chair, Janet Yellen, Vice-chair Stanley Fischer, and San Francisco Fed President John Williams all focused on high equity valuations in speeches at separate locales.
Thus, market participants wet their pants on the awful prospect that their enormous gains would somehow evaporate if the accommodative policies of the Federal Reserve were to be unwound. Of course, they're right. Almost all of the gains of the past eight years have been the result of loose monetary policy. Any tightening of such policies would mean that stocks might not be so easily gushed to higher levels.
Bond yield rose substantially, with the 10-year-note gaining to 2.19%, erasing all of June's gains.
Not that any of today's loose lip talking matters. Actions will determine the ultimate direction of the markets. While some degree of sanity and honest price discovery in markets would no doubt involve a lower rate of return than what's been considered normal since 2009, it also might result in crisis, as all manner of wealth is tied to stocks and their continued appreciation.
At the Close, 6/27/17:
Dow: 21,310.66, -98.89 (-0.46%)
NASDAQ: 6,146.62, -100.53 (-1.61%)
S&P 500 2,419.38, -19.69 (-0.81%)
NYSE Composite: 11,716.92, -41.94 (-0.36%)
Jawboning by Fed officials and today, especially, the grand liar of Europe, Mario Draghi, led the assault on spec stocks and the market in general by threatening to take away the low interest rate punchbowl.
Draghi's comments came at an economic conference in Portugal, ECB President Mario Draghi said that as economic prospects improve in Europe, the ECB could make adjustments to its policies of sub-zero interest rates coupled with huge bond purchases.
As if that wasn't enough, a trio of Federal Reserve loudmouths set their jaws to yapping about asset values, cueing a collapse in the equity and bond markets.
Fed Chair, Janet Yellen, Vice-chair Stanley Fischer, and San Francisco Fed President John Williams all focused on high equity valuations in speeches at separate locales.
Thus, market participants wet their pants on the awful prospect that their enormous gains would somehow evaporate if the accommodative policies of the Federal Reserve were to be unwound. Of course, they're right. Almost all of the gains of the past eight years have been the result of loose monetary policy. Any tightening of such policies would mean that stocks might not be so easily gushed to higher levels.
Bond yield rose substantially, with the 10-year-note gaining to 2.19%, erasing all of June's gains.
Not that any of today's loose lip talking matters. Actions will determine the ultimate direction of the markets. While some degree of sanity and honest price discovery in markets would no doubt involve a lower rate of return than what's been considered normal since 2009, it also might result in crisis, as all manner of wealth is tied to stocks and their continued appreciation.
At the Close, 6/27/17:
Dow: 21,310.66, -98.89 (-0.46%)
NASDAQ: 6,146.62, -100.53 (-1.61%)
S&P 500 2,419.38, -19.69 (-0.81%)
NYSE Composite: 11,716.92, -41.94 (-0.36%)
Friday, April 14, 2017
If The Fed Is Upset On The CPI Drop And Stubbornly-Low Interest Rates, It Must Be A Good Friday
It's Good Friday and some of us have just finished doing our taxes (such as this writer), so, some of us are wondering what's so good about this particular Friday.
Aside from the generally-obvious religious conventions (Shouldn't it be called Bad Friday because it's the day Jesus Christ was crucified, and that doesn't seem so good?), there probably are some good things afoot.
First, the financial markets are closed, always a bonus. Second, the Labor Department announced today that the Consumer Price Index (CPI) dropped 0.3 percent, the first decline since February 2016. They said that lower cell phone service and gasoline costs outpaced higher rents and a slight increase in food costs (0.3%).
If those food costs are to be believed, since the amount of food most people eat (and buy) can be self-regulated, higher food costs aren't really an issue at all, especially since practically nobody in America is starving at the present time.
This CPI number brings up some interesting possibilities. If the United States is actually experiencing deflation (or, as the TV pundits like to call it, because deflation is bad, you know, "disinflation") then prices are going down, everything is going to cost less. That's the bane of a strong dollar. Imports are cheaper, and, in an economy that relies on lots of imports, that drives domestically-produced goods and services down as well.
It's a win-win-win for everybody, except, possibly, the Federal Reserve, banks and bond investors who are getting anxious and perhaps a bit desperate for higher interest rates.
Well, crocodile tears are the order of the day for them. Higher interest rates are not going to happen unless the economy is strong, meaning many excess jobs are being created, pushing wages higher, and producers are experiencing strong pricing power. Both of those items - jobs and pricing - seem to be going in reverse over the short term. Bond prices have been soaring because yields have been stubbornly opposed to any kind of rise, the now nearly constant urging and jawboning from the genii at the Federal Reserve, Janet Yellen, Stanley Fisher, et. al. notwithstanding.
The 10-year note is hovering around 2.25% yield. That doesn't bode well for inflation. No, not at all.
Stocks were lower for the week, but they're still within a few percentage points of all-time highs. Rich people and people with 401k or pension plans are probably not very concerned with their stock holdings.
In conclusion, this may actually be a pretty good Good Friday after all. Cheaper gas and phone service is a plus and eating a little less is probably not a bad idea in a nation of fatties. Plus, if the people over at the Fed are perplexed or constipated or otherwise annoyed or agitated, that's a huge bonus.
Happy Easter. Don't eat too much ham, lamb, or hard-boiled eggs.
At The Close, Thursday, April 13, 2017:
Dow: 20,453.25, -138.61 (-0.67%)
NASDAQ: 5,805.15, -31.01 (-0.53%)
S&P 500: 2,328.95, -15.98 (-0.68%)
NYSE Composite: 11,324.53, -98.64 (-0.86%)
For the Week:
Dow: -202.85 (-0.98%)
NASDAQ: -72.66 (-1.24%)
S&P 500: -26.59 (-1.13)
NYSE Composite: -121.05 (-1.06%)
Aside from the generally-obvious religious conventions (Shouldn't it be called Bad Friday because it's the day Jesus Christ was crucified, and that doesn't seem so good?), there probably are some good things afoot.
First, the financial markets are closed, always a bonus. Second, the Labor Department announced today that the Consumer Price Index (CPI) dropped 0.3 percent, the first decline since February 2016. They said that lower cell phone service and gasoline costs outpaced higher rents and a slight increase in food costs (0.3%).
If those food costs are to be believed, since the amount of food most people eat (and buy) can be self-regulated, higher food costs aren't really an issue at all, especially since practically nobody in America is starving at the present time.
This CPI number brings up some interesting possibilities. If the United States is actually experiencing deflation (or, as the TV pundits like to call it, because deflation is bad, you know, "disinflation") then prices are going down, everything is going to cost less. That's the bane of a strong dollar. Imports are cheaper, and, in an economy that relies on lots of imports, that drives domestically-produced goods and services down as well.
It's a win-win-win for everybody, except, possibly, the Federal Reserve, banks and bond investors who are getting anxious and perhaps a bit desperate for higher interest rates.
Well, crocodile tears are the order of the day for them. Higher interest rates are not going to happen unless the economy is strong, meaning many excess jobs are being created, pushing wages higher, and producers are experiencing strong pricing power. Both of those items - jobs and pricing - seem to be going in reverse over the short term. Bond prices have been soaring because yields have been stubbornly opposed to any kind of rise, the now nearly constant urging and jawboning from the genii at the Federal Reserve, Janet Yellen, Stanley Fisher, et. al. notwithstanding.
The 10-year note is hovering around 2.25% yield. That doesn't bode well for inflation. No, not at all.
Stocks were lower for the week, but they're still within a few percentage points of all-time highs. Rich people and people with 401k or pension plans are probably not very concerned with their stock holdings.
In conclusion, this may actually be a pretty good Good Friday after all. Cheaper gas and phone service is a plus and eating a little less is probably not a bad idea in a nation of fatties. Plus, if the people over at the Fed are perplexed or constipated or otherwise annoyed or agitated, that's a huge bonus.
Happy Easter. Don't eat too much ham, lamb, or hard-boiled eggs.
At The Close, Thursday, April 13, 2017:
Dow: 20,453.25, -138.61 (-0.67%)
NASDAQ: 5,805.15, -31.01 (-0.53%)
S&P 500: 2,328.95, -15.98 (-0.68%)
NYSE Composite: 11,324.53, -98.64 (-0.86%)
For the Week:
Dow: -202.85 (-0.98%)
NASDAQ: -72.66 (-1.24%)
S&P 500: -26.59 (-1.13)
NYSE Composite: -121.05 (-1.06%)
Saturday, August 27, 2016
Yellen Speaks, Markets More Confused After Comments By Fisher, Bullard, Lockhart
After a week-long wait for something of substance from Fed Chair Janet Yellen in her widely-anticipated speech at Jackson Hole Friday, markets were somewhat disappointed when what they got from the aging, dowdy Fed Chairwoman was more of the same, a garbled, directionless mumbling about a strengthening US economy and plenty of buts, ahs, and well maybes.
Yellen seemed to express that a rate hike was on the table in September - just as it was in February, June and July - but offered certain caveats, not the least of which was that unexpected events could derail any plans the Fed might have considered.
Adding to the dismay and confusion were three separate comments by Fed officials in the immediate aftermath of Yellen's speech.
Vice Chairman, Stanley Fischer first spoke up with a weak affirmation that a rate hike in September was possible, but quickly afterward, Atlanta president, Dennis Lockhart, and St. Louis president James Bullard offered a different view, questioning the wisdom of a rate hike in September or even December.
Since markets have been on a razor's edge since Brexit and will be until the presidential election in November, it does seem a stretch that the Fed would risk a market collapse triggered by a rate hike, such as what happened after their last 1/4 basis point increase last December.
The Fed being less stoic and more political than ever, risking injury to Hillary Clinton's election - the choice of the status quo - would be foolhardy and dangerous.
Not to say that the Fed is not both of those, but when there's a real risk that an outsider - Donald J. Trump - could ascend to the highest office in the land, the Fed will be watching its own best interests, which would imply that a federal funds rate increase in September is certainly a no-go.
Now that the Fed has wasted the better part of a month and delivered nearly nothing of substance, one wonders what they can do for an encore. Oh, that's right. Eight years of loose, experimental monetary policy and promises of more to come.
What fun.
Friday's Closing Data:
Dow Jones Industrial Average
18,395.40, -53.01 (-0.29%)
NASDAQ
5,218.92, +6.71 (0.13%)
S&P 500
2,169.04, -3.43 (-0.16%)
NYSE Composite
10,749.33, -35.04 (-0.32%)
For the Week:
Dow 30: -157.17 (-0.85%)
S&P 500: -14.83 (0.68%)
NASDAQ: -19.46 (-0.37%)
NYSE Composite: -79.83 (-0.74%)
Yellen seemed to express that a rate hike was on the table in September - just as it was in February, June and July - but offered certain caveats, not the least of which was that unexpected events could derail any plans the Fed might have considered.
Adding to the dismay and confusion were three separate comments by Fed officials in the immediate aftermath of Yellen's speech.
Vice Chairman, Stanley Fischer first spoke up with a weak affirmation that a rate hike in September was possible, but quickly afterward, Atlanta president, Dennis Lockhart, and St. Louis president James Bullard offered a different view, questioning the wisdom of a rate hike in September or even December.
Since markets have been on a razor's edge since Brexit and will be until the presidential election in November, it does seem a stretch that the Fed would risk a market collapse triggered by a rate hike, such as what happened after their last 1/4 basis point increase last December.
The Fed being less stoic and more political than ever, risking injury to Hillary Clinton's election - the choice of the status quo - would be foolhardy and dangerous.
Not to say that the Fed is not both of those, but when there's a real risk that an outsider - Donald J. Trump - could ascend to the highest office in the land, the Fed will be watching its own best interests, which would imply that a federal funds rate increase in September is certainly a no-go.
Now that the Fed has wasted the better part of a month and delivered nearly nothing of substance, one wonders what they can do for an encore. Oh, that's right. Eight years of loose, experimental monetary policy and promises of more to come.
What fun.
Friday's Closing Data:
Dow Jones Industrial Average
18,395.40, -53.01 (-0.29%)
NASDAQ
5,218.92, +6.71 (0.13%)
S&P 500
2,169.04, -3.43 (-0.16%)
NYSE Composite
10,749.33, -35.04 (-0.32%)
For the Week:
Dow 30: -157.17 (-0.85%)
S&P 500: -14.83 (0.68%)
NASDAQ: -19.46 (-0.37%)
NYSE Composite: -79.83 (-0.74%)
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