Holding Pattern

Holding pattern.  Stocks remained in a holding pattern ahead of the Fed meeting and next week’s G-20 meet-up.  Stocks advanced slightly yesterday amidst speculation over rate cuts, despite an ominous economic number.

MY TWO CENTS

1.  F.O.M.O. at the E.C.B. For those of you that don’t know, FOMO stands for “fear of missing out”.  It is actually a large driver of market psychology where crowds rush in or out late in a move fearing that they missed out on the ride.  Pro tip: those late moves usually end in anguish.  In this case I am referring to the European Central Bank, which despite increasingly sluggish growth has been resisting any form of easing finally decided to take a cue from the Fed.  WHILE YOU SLEPT, ECB President Mario Draghi took a page out of Jerome Powell’s playbook and sprayed the market with hopes of monetary easing by stating that the bank would “use all the flexibility within [their] mandate”.  The result: Global bonds and stocks traded up.  Markets like the idea of stimulus.

2.  The state of the State, NY State, is telling us something we best not ignore.  The New York Federal Reserve Bank releases a monthly survey of manufacturing activity in the NY Fed region.  Yesterday, the Index was expected to grow by +11 points but instead fell by -8.6 points reflecting a contraction in manufacturing.  The move represents the largest monthly loss on record.  Digging further into the numbers, we see that orders are down, average workweek is down, and prices paid are up, amongst other factors.  While the number is only considered a minor number because it is regionally focused, the extreme move should not be ignored.  No reason to panic, but more justification to be diligent.

THE MARKETS

Stocks were on vacation again yesterday as traders await the results of the FOMC meeting which begins today and will wrap up tomorrow with a policy statement, press release, and data dump.  Traders are hopeful that the Fed will send positive signals hinting toward rate cuts later this summer.  The hints can come as subtleties in the verbiage of the policy statement, statements by the Chairman in his press release, or in the dot plots.  Stocks advanced slightly and the S&P 500 climbed by +0.09%,  the Dow Jones Industrial Average traded up by +0.09%, the Russell 2000 ascended by +0.67%, and the NASDAQ 100 jumped by +0.63%.  Crude Oil resumed its retreat slipping by -1.1% heading back to its key support level.  Bitcoin has been on the rise in recent months and yesterday cryptocurrency rocketed up by +9.7% to 9273, a level not seen since 2018.  Many speculate that the move was in response to Facebook’s pending announcement of their own crypto-payment initiative.  Bonds climbed slightly and 10-year treasury yields ticked up by +1 basis point to 2.09%.

WHAT’S NXT

- The Census Bureau will release Housing Starts which are expected to have grown by +0.4% month over month, slower than last month’s +5.7% growth.  Building Permits are expected to have shown a month over month gain of +0.2% compared to last month’s +0.6% growth.

- US Trade Representative Robert Lighthizer will testify before the Senate Finance Committee.

- Adobe and Jabil will release their 1Q earnings after the bell.

- President Trump will officially kick off his 2020 campaign in Florida tonight… in prime time.

daily chartbook 2019-06-18