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FOMC Minutes Indicate Waning Enthusiasm for QE


Today's financial recap and tomorrow's financial outlook.

Japan's Prime Minister Shinzo Abe published an editorial last night on the World Economic Forum, stating that he sees Japan on the precipice of strong wage gains after more than a decade of stagnation. The PM feels strongly about this positive development in Japan after recent meetings with government, business, and labor leaders. Moreover, he feels that the 5-trillion-yen fiscal-stimulus plan should far outweigh the negative effects of the planned sales-tax increases in Japan.

Also overnight we heard comments from IMF Managing Director Christine Lagarde. She stated that the Fund intends to upgrade its outlook for global economic growth in the next three weeks. Recently, Lagarde mentioned that the ongoing recovery in developed markets may hamper additional capital investment in emerging markets.

ADP reported that companies added 238,000 private jobs in December 2013, beating the estimate of 200,000. The November 2013 payroll growth was revised up to 229,000 from 215,000. This positive report implies Friday's nonfarm payrolls will be stronger than the economist estimate of 195,000.

US equities mustered some strength early in the session, but failed to hold onto these gains by the close of trading. The S&P 500 (INDEXSP:.INX) declined by 0.02%. Telecom-sector stocks were the worst performers today, losing 1.68%, partly due to the stocks trading ex-dividend. Additionally, there was a block sale of 7 million shares of AT&T (NYSE:T) in the pre-market, which was worth $240 million. Energy stocks also suffered due to losses of greater than 1% in both natural gas and crude oil futures.

The Fed released the minutes of its December 2013 FOMC meeting. There was a strong consensus by the committee to wind down asset purchases this year in measured steps due to cumulative progress in the labor market. Additionally, members had growing concerns that the benefits of asset purchases were waning; some members had pushed for a larger reduction in purchases at the December meeting.

Tomorrow's Financial Outlook

Tomorrow morning the weekly jobless claims report will be released by the Labor Department for claims submitted in the week ending Saturday, January 4. The report will likely be higher than expectations, due to seasonal issues associated with the New Year's Day holiday. Next week's report should begin to show the true trend in claims.

At 10:00 a.m. EST, the House's monetary policy subcommittee will hold a meeting to discuss the Fed's bond-buying programs.

The ECB and Bank of England will release their monthly monetary-policy decisions tomorrow morning before the US markets open. Due to continually weak inflation readings in Europe, it is very likely the ECB will continue to put its full efforts into deflation-fighting measures. Also scheduled for release tomorrow is German industrial production and eurozone consumer confidence data.

Alcoa (NYSE:AA) will kick off earnings season with its report tomorrow after the close. Also scheduled to report is Texas Industries (NYSE:TXI) and Supervalu (NYSE:SVU).

Twitter: @Minyanville

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