Fed Minutes Move Markets
Fed Minutes showed that the Fed is concerned about credibility with the public more so than how their policy will affect the economy. For example from the minutes:
“MANY' PARTICIPANTS JUDGED THERE WAS A 'SIGNIFICANT RISK' HIGHER INFLATION COULD BECOME ENTRENCHED IF PUBLIC QUESTIONS FED'S RESOLVE”
Here we can see they are more concerned with what the public does versus what the Fed needs to do. This is problematic on several levels. The most obvious problem is the need to raise rates again even if they will need to cut them in 2023. Per the Fed minutes:
PARTICIPANTS AT JUNE MEETING 'CONCURRED' THAT INFLATION OUTLOOK HAD DETERIORATED, WARRANTING HUGE 0.75-PERCENTAGE-POINT RATE INCREASE
With the Core PCE Index coming in lower than expected at 3.% we would expect to see a more conservative fed. Instead we see the bond market selling today based upon the comments. The 10 year bond yield rallied to 2.91% today this is after being at 2.75% earlier. Its not normal for the bond market to have such wild daily swings and this uncertainty is making investors cautious. After the Fed minutes were released we saw the indexes trade up until the end of the day and then we saw dumping in the last 10 minutes. This leads us to surmise that larger funds are concerned about overnight risk. When trillion dollar companies are moving 1% in 10 minutes it means indecision and that does not breed a sustainable rally environment. Tomorrow we have the Non Farm Employment Change being released at 8:15 am. This is a precursor to Non Farm Payrolls released on Friday at 8:30.
Technically speaking we are still grossly oversold with only 15% of stocks in the Nasdaq 100 being above the 200 day moving average. This is a level not seen since the pandemic. We did bounce off the 2008 financial crisis low reading but this is still an extremely low reading now. See below.
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