Considerable Time of the Essence What was that I said yesterday about stocks probably not springing back as readily from Mondays selling as they have done in the past? Yeah, well, that proved wrong because a late-morning comment from Wall Street Journal Fed watcher, Jon Hilsenrath, proved right for the stock market. Briefly, Mr. Hilsenrath, who is believed by some to be the Feds public sounding board, opined that the Fed may keep its considerable time language in todays directive, albeit with some qualifications. The market, which has been flummoxed for only a relatively brief time by the thought that the considerable time language might be taken out, ran on the news and hardly looked back. The Dow Jones Industrial Average even managed to establish a new record intraday high. It didnt hurt either that there were also reports around the same time that the Peoples Bank of China was going to make a CNY500 billion liquidity injection into Chinas five largest banks. I dont know what the Chinese character for stimulus is, but the image of a bull would probably get the message across considering policy stimulus and this bull market have gone hand in hand. So, the market enters this FOMC day biding its time to see if it can count on the considerable time palliative for a while longer or if it will have to make do for some time without its considerable time crutch. Well know more at 2:00 p.m. ET when the directive is released and well hear more when Fed Chair Yellen conducts her press conference to review the Feds decision and updated economic projections. What we know now is that the market is depending on Mr. Hilsenraths view of things. Should that prove wrong and the Fed surprises by taking out its considerable time language, there is a good chance that we could see some notable downside action in stocks and a strong boost in the dollar that would clip commodity prices. Well just have to bide our time until then. We think the risk of a hawkish surprise should not be dismissed considering: (a) FOMC hawks have grown more vocal about wanting to change the language (b) the Fed Chair has a press conference opportunity to explain it and (c) the timing is better politically since the October FOMC meeting will take place just before the mid-term elections. Then again, the August CPI report released this morning might be just enough to maintain the status quo at the FOMC. It was not the most uplifting report for policy makers with total CPI declining 0.2% (Briefing consensus 0.0%) and core CPI, which excludes food and energy, being unchanged (Briefing consensus +0.2%). It was the first decline in total CPI since April 2013 and it was driven by a 2.6% decline in the energy index. Meanwhile, it was the first time since October 2010 that the core price index did not increase. Shelter costs were up 0.2% in August, yet price indexes for used cars and trucks, apparel, airline fares, and household furnishings all declined. On a year-over year-basis, total CPI was up 1.7% versus 2.0% in July. Core CPI was also up 1.7%. The S&P futures market moved up a bit on the report, but it is still only trading slightly above fair value with participants recognizing that considerable time is of the essence. Read more: briefing
Posted on: Wed, 17 Sep 2014 13:26:46 +0000
Trending Topics
Recently Viewed Topics
© 2015