T3’s Take 3: The Fed Hits and Nothing Changes
1) Fed Schmed…
Today, the Fed released the Minutes from its July meeting.
Traders were pricing in a 51% chance of a December rate hike, which meant expectations were split right down the middle.
Unfortunately, we did not get much on the Fed’s near-term trajectory.
Some FOMC officials are waiting for signs of improved inflation trends.
Others were more optimistic, saying that the labor market is approaching maximum employment, and that progress in reaching the Fed’s inflation goals is expected continue.
But overall, the Fed leaned dovish, which sent the dollar lower, and commodities higher.
2) The Grind Continues
Following lackluster action overseas, US markets were weak in early trading, and the S&P 500 looked like it may even put in its first down day since July 27.
But after dipping to 2168.50, the index ran up in a straight line, aside from a tiny dip following the release of the FOMC Minutes. By day’s end, the S&P managed to squeeze into the green with a 0.2% gain.
Utilities led the winners’ column on the Fed’s dovishness, while small caps showed relative weakness.
And much to my chagrin, the VIX hit an early high at 13.71, but collapsed to 12.17 as stocks climbed off the lows.
3) Crude Oil Keeps on Chugging
Oil prices rallied again today after a bullish inventory report from the Energy Information Administration.
Economists expected a 950,000 increase in inventories, but they fell a whopping -2.5 million. Gasoline inventories also fell significantly.
Oil was also boosted by the weak dollar, and ongoing hopes an OPEC production freeze or cut.
As a result, energy stocks outperformed today.
Thursday’s Trading Calendar
US Economics (Time Zone: EDT)
08:30 Initial Jobless Claims (8/13): exp. 265k, prior 266k
08:30 Continuing Claims (8/6): exp. 2141k, prior 2155k
08:30 Philadelphia Fed Business Outlook (Aug): exp. 2, prior -2.9
09:45 Bloomberg Economic Expectations (Aug): prior 44.5
09:45 Bloomberg Consumer Comfort (8/14): prior 41.8
10:00 Fed's Dudley Answers Questions at Press Briefing in New York
10:00 Leading Index (Jul): exp. 0.30%, prior 0.30%
10:30 EIA Natural Gas Storage Change (8/12): exp. 26, prior 29
10:30 EIA Working Natural Gas Implied Flow (8/12): exp. 26, prior 29
16:00 Federal Reserve President John Williams Speaks in Anchorage
20:00 Fed's Kaplan to Speak in Dallas
Global Economics
04:30 GBP Retail Sales m/m
08:30 CAD Foreign Securities Purchases
Earnings
Before Open:
Canadian Solar Inc (CSIQ)
Wal Mart Stores (WMT)
After Close:
Gap Inc (GPS)
Ross Stores (ROSS)
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