Watch my new YouTube video: “The market’s big fear is the economy”
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My forty-ninth YouTube video “The market’s big fear is the economy” went up today.
More (verbal) news from the Fed this afternoon than the consensus expected
As expected the Federal Reserve’s Open Market Committee kept the central bank’s benchmark interest rate at 0% to 0.25% and left its bond buying program on a path to buy $120 billion of Treasuries and mortgage-backed assets a month. Unexpectedly, though, the bank indicated that a reduction in that bond buying program could happen “soon.” progress toward the Fed’s employment and inflation goals “continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted,” the central bank’s said Wednesday in a statement following its two-day meeting. The Fed’s dot plot survey of central bank officials also revealed a move toward raising interest rates earlier than in the last survey in June.
Stocks have yet to start noticing slowing economy in second half of 2022
Just about all of the Pandemic stimulus programs–checks for households, no-cost small business loans, enhanced unemployment payments–will have expired by sometime in 2022. Which is leading economists to project a slowdown in the U.S. economy for the second half of 2022. No matter what the size of the Biden administration budget finally turns out to be. U.S. fiscal policy will go from stimulating economic activity to acting as a drag on the economy. The Brookings Institution’s Hutchins Center calculates that the economic impact from federal, state and local-government taxes and spending turned negative in the second quarter of 2021 and will remain that way into 2023.
Stocks gain on “No surprises” speech from Powell
Federal Reserve Chair Jerome Powell didn’t surprise Wall Street with his speech today at the (virtual) Jackson Hole central bankers conference. Instead he left the Federal Reserve on a path to begin reducing its purchases of Treasuries and mortgage-backed assets from the current $120 billion a month rate sometime in 2021. Powell said added that at the Fed’s last policy meeting in July, he “was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.” Powell did not lay out a clear timeline for when the Fed could change its policies, or how the Fed could structure its taper. And most importantly for Wall Street he didn’t push ahead with a schedule for raising the central bank’s benchmark interest rate from the current 0% to 0.25% range.
Treasury options market will be “active” tomorrow–will this add to post Jackson Hole volatility?
More than 2 million options on the September 10-year Treasury expire by the end of trading tomorrow, August 27. That’s 63% of all options open interest in Treasuries. It “looks” like the positioning of those Treasury options is relatively balanced. Bloomberg reports that data from JPMorgan Chase show that the bank’s clients have pulled back on short bets on a steeper yield curve after tomorrow’s speech (10 a.m. New York time) by Fed chair Jerome Powell. But I wouldn’t bet against some extra volatility tomorrow.
Is it “Delta Variant to the rescue” for financial bets on lower for longer interest rates from the Fed?
This quote on Bloomberg today caught my eye. It may be a crucial explanation for why the market is so unfazed by the possibility that the Federal Reserve might announce a schedule for paring back its $120 billion in bond purchases either at next week’s central bankers speech fest or at the Fed’s own mid-September meeting.
Initial claims of unemployment drop to lowest level since March 2020
Initial unemployment claims at regular state unemployment programs doped to 348,000 for the week ended August 14. That’s down from a revised 377,000 in the prior week and below the 364,000 projected by economists surveyed by Bloomberg. The four-week moving average for new climbs fell by 19,000 to 377,750. The drop was the fourth straight weekly decline and took the weekly number down to the lowest level since March 2020. Just for reference, though, new claims for unemployment averaged 200,000 a week before the Pandemic.
Release of Federal Reserve July minutes sends stocks tumbling
Very little mystery about what sent stocks lower today, August 18. As of 2:10 p.m. New York time the Dow Jones Industrial Average was essentially flat for the day with a tick down of just 0.05%. By 2:16, after the release of minutes from the Federal Reserve’s July 28 meeting the index had dropped to a loss of 0.44% on the day. The downward trend continued to the close with the Dow off 1.08% on the day (or 382 points) and the Standard & Poor’s 500 lower by 1.07%. The NASDAQ Composite was down 0.89% and the NASDAQ 100 closed off 0.97%. The small cap Russell 2000 index lost 0.84%. The iShares MSCI Emerging Markets ETF (EEM) gained a scant 0.16%. So what in the minutes spooked stocks?
The guessing game continues: Wall Street Journal pegs November for start of Fed’s wind down of bond purchases
A report in this morning’s Wall Street Journal concludes that Federal Reserve officials are moving toward agreement on a timetable that would see the central bank begin scaling back its easy-money policies in about three months if the economic recovery continues.
July job report says the economy added 943,000 jobs in July: Did it really? What’s it all mean
This morning the Labor Department released its July jobs report. It showed a gain in non-farm payrolls of 943,000 against 938,000 in June and the 865,000 projected by economists surveyed by Bloomberg. The headline unemployment rate fell to 5.4% from 5.9% in June and a projected 5.7%. But there are good reasons for reading these numbers with even more care than usual.
Federal Reserve says it is staying the course, for now
No change. But change coming someday. (Not soon, though.) That was the message from today’s meeting of the Federal Reserve’s Open Market Committee.
CPI inflation climbs to 5.4% annual rate, stocks shrug
The Federal Reserve has said that the current jump in inflation is temporary, a result of post-pandemic glitches in the supply chain. So far the market is going along with that view. But huge jumps in monthly inflation in May and now, this morning, June are treating that confidence.
The consumer price index (CPI) rose 0.9% in June from May and by 5.4% from June 2020, according to the Labor Department today. Excluding more volatile food and energy components, core CPI inflation rose by 4.5% from June 2020. That’s the biggest jump in core inflation since November 1991.
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