Traders Believe that the US Economy is not as Strong as Fed Thinks

Traders Believe that the US Economy is not as Strong as Fed Thinks

Traders Believe that the US Economy is not as Strong as Fed Thinks

$DIA, $SPY, $QQQ, $VXX

The head of NYSE floor operations for UBS, Art Cashin, said he doubts the Fed will be able to raise interest rates again this year because of underlying weakness in the US economy.

“The Fed is going to have to wake up. I don’t think the economy is as good as it looks,” Mr. Cashin said Thursday. “The inflation numbers were not good. Retail sales were not good.”

Mr. Cashin spoke a day after Fed policymakers approved a 0.25% rate hike, the 2nd increase of Y 2017 and the highest in 9 years. The central bank forecast another rate increase later this year, alongside efforts to reduce its $4.5-T holdings of US government debt.

The economy grew at a 1.2% annualized rate in Q-1, slowing from the 2.1% pace in the October-December frame. The Atlanta Fed forecast that economic growth will accelerate to 3.0% annualized rate in Q-2.

Data on retail sales, manufacturing, wage growth and inflation do not support the idea of a vigorous economy, though. The Fed said inflation likely will be less than its 2% target this year

“It’s not that the economy is on life support but it’s certainly not robust,” Mr. Cashin said. “It’s not ready to do a marathon yet.”

Traders tracked by the Chicago Merc do not expect the Fed to raise rates in September or December. The CME FedWatch Tool indicates a market estimate of a rate hike in March of Y 2018

Weakening oil prices that may indicate commercial activity isn’t strong enough to reduce a glut in energy products also hurts.

“If Crude Oil sells off again and breaks $44 bbl, it will have a very negative influence on the market,” Mr. Cashin said.

Note:  WTI Crude Oil finished down on the day, continuing its sell-off for the 3rd session running, futures settled 0.34 lower to $44.45 bbl.

Thursday, the US major stock market indexes finished at: DJIA -14.66 at 21359.90, NAS Comp -29.39 at 6165.47, S&P 500 -5.46 at 2432.46

Volume: Trade was light to moderate at: 829-M/shares exchanged.

  • NAS Comp +14.5% YTD
  • S&P 500 +8.7% YTD
  • DJIA +8.1% YTD
  • Russell 2000 +3.9% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.39) Neutral (0.23) Bullish (0.42) Very Bullish (0.51)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.47) Bullish (0.39) Bullish (0.44) Very Bullish (0.58)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (0.20) Neutral (-0.03) Neutral (0.06) Very Bullish (0.58)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.34) Bearish (-0.34) Bearish (-0.39) Bearish (-0.29)

Stay tuned…

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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