With markets awaiting today’s release of the FOMC minutes, here is what the big money is watching.
A portion of today’s note from Art Cashin: I Was Just About To Say That – The key event of the day is likely to be the release of the most recent FOMC minutes at 2:00. My friend, Peter Boockvar, over at the Lindsey Group, beat me to the punch in a morning note to some friends.
Here’s a bit:
Following another round of Fed President’s beating the drum for rate hikes which has resulted in an almost 10 bps increase in the 2 yr note this week and the fed funds futures contract for December pricing in an 86% chance of one rate hike by yr end vs 56% last Friday, take out the aspirin as we read the FOMC minutes at 2pm from their last meeting three weeks ago. What this market response does after the recent comments from Williams and Lockhart is make tomorrow’s Stanley Fischer and Bill Dudley’s speeches hugely important which will be followed on May 27th by Janet Yellen because it’s all up to the troika, not what Fed Presidents want. That said, we don’t think the Fed moves in June (market odds are only 16%) for the sole reason of the UK EU vote that follows the week after. Thereafter though, the pressure is on as inflation stats move higher at the same time the labor market stats have met their targets but GDP growth has not. Lastly, as to John Williams and Dennis Lockhart’s desire for 2- 3 rate hikes this year, the fed funds futures market is not fully pricing in a 2nd hike from here until May 2018.
The markets will scour the minutes for some sense of consensus. That would be more powerful than any group of individual speakers.
Overnight And Overseas – The U.S. put a whopping import duty on Chinese steel. Traders will watch for any signs of a countermove. Japan avoided slipping into a recession as the GDP grew at a surprising 1.7%.
In Asian markets, Tokyo was mixed and India was a bit softer as Shanghai and Hong Kong saw selloffs. In Europe, stocks are generally mixed with minor downticks in most markets.
Other areas show minor moves. Crude is up a touch while gold and the euro is lower against the dollar. Yields are up just a bit.
Consensus – Pundits continue to pound on a possible hike. That likely will pressure stocks. S&P breaking below 2039 would not be a good omen.
Watch out for possible volatility with the 2:00 release of the minutes.
Stay wary, alert and very, very nimble.
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