The FOMC Meets This Week, Markets Cautions
$DIA, $SPY, $QQQ, $VXX
Expect the FOMC to refrain from any action on interest rate policy, it may signal the possibility of a rate hike sometime this year (hawkish), perhaps in September or December.
Fed officials’ openness to raising interest rates later this year will reflect their comfort with the health of the US labor market, including several additional indications in recent weeks that the weak job creation numbers for May were an outlier. Its assessment of inflation will remain unchanged.
The Fed officials is comfortable with how financial markets brushed off the outcome of the Brexit referendum in the UK. Perhaps a yield chase buy investors which may crash.
The possibility of a Y 2016 rate hike has been decreased by a less-positive economic data input, and any thoughts of a rate hike will remain highly conditional due to the overall uncertainties facing the global economy.
The US central bankers are aware that 2 Key monthly job reports are scheduled before they meet again in September.
And the FOMC will be very careful not to get caught up in the US presidential election in November, global political and geopolitical uncertainties are likely to be part of the reason for Fed officials to keep options open in here.
Mohamed El-Erian said today that the most likely immediate market impact of all this will be some repricing of shorter-maturity US Treasuries, as traders and investors revise somewhat higher their expectations for the 2016-17 path of the fed funds rate.
What happens in financial markets essentially depends on 2 Key data points, they are:
- Whether this week’s set of corporate earnings also beats expectations, and
- How far financial markets remain focused on short-term corporate and central bank liquidity injections as opposed to the more gradual impact of weak fundamentals.
Monday, the US major market indexes finished at: DJIA -77.79 at 18493.06, NAS Comp -2.53 at 5097.63, S&P 500 -6.55at 2168.48
Volume: Trade with light again, with about 756-M/shares exchanged on the NYSE, Breadth was negative.
- Russell 2000 +6.5% YTD
- DJIA +6.1% YTD
- S&P 500 +6.1% YTD
- NAS Comp +1.8% YTD
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Bullish (0.31)||Neutral (0.19)||Very Bullish (0.50)||Bullish (0.25)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Bullish (0.25)||Bullish (0.25)||Bullish (0.35)||Neutral (0.14)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Bullish (0.35)||Neutral (0.23)||Very Bullish (0.52)||Bullish (0.31)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Bearish (-0.30)||Bearish (-0.32)||Bearish (-0.33)||Bearish (-0.25)|