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Buzz Bits: Dow, Nasdaq Surge

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Your daily Buzz & Banter highlights...

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Why Didn't the FOMC Statement Just Go Ahead and Say: Welcome To Stagflation? - Lance Lewis - 3:56 PM

While the Fed went out of its way to make today's statement as agreeable for both sides (dovish vs. hawkish) as possible, clearly they moved more towards the dovish side with this statement, even though given the inflationary outlook, they shouldn't have... which was also exactly what we've been expecting.

As for the market's reaction: Stocks obviously love it (or at least they do for now until we see what the bond market is going to say about this over the next several days). The 2/10 inversion has gone from -5 bps and returned to a spread of +1 for the first time in months in the wake of the FOMC. (i.e.- the Fed sensitive short-end rallied, while the long end is unch... the curve steepened). The dollar index has turned negative and is at a new low for the move, while gold is up $5.

So, we're also pretty much getting the reaction that we thought we would. Now we have to see if the dollar's weakness is going to affect the bond market at all in the coming days, which might cause a problem for stocks again at some point. Meanwhile, gold should continue to shine, while the dollar is rocked and expectations for rising inflation increase, as the market grapples with the stagflationary box that the Fed finds itself in.

Position in gold


Bell Buzz - Todd Harrison - 3:43 PM
  • You know that whole "what vs. why" discussion we were having earlier? Let's circle that thought for a later day (after the inertia abates). As it stands, I'm hearing alotta reasons being assigned to the rhyme away from the 'Ville.

  • I've been trading like a banshee since the FOMC decision and the requisite high of relief. The net/net is that I've (thus far) wasted a noice day of out-performance by my longs. Happens to the best of us.

  • Be that as it may, my stated plan to pare my put position (win, lose or draw) into the close remains the same. Good traders know how to make money, great traders know how to take a loss. I'm far from a 'great trader' but that vibe seems apropos right about now.

  • Does anyone remember what happened to the market the last time the Fed started cutting rates? Anyone? Bueller?

  • A pimple. Inside my nose. Honestly!

  • So with that (and a whole lotta this), I'm gonna flip lids and juggle my struggle as I manicure my overnight risk. Good vibes into the bell, Minyans. Hit 'em hard.


R.P.



Sucker Bets - Rod David - 1:21 PM

The horses are starting to line up at the gate, and the betting windows will be closing soon. Have you ever noticed that it's not the big bettors who are rushing to buy that last-minute ticket? Those guys have already wagered.

They don't mix with the speculative, gut-feel players that tend often to be wrong.

As the FOMC news nears, it's important to detect which opinion is influencing price action. Just trading narrowly like this morning would suggest that fear is dominant. But the narrow range also probed yesterday's highs, reflecting optimism, dangerous with market-moving news essentially minutes away.

If there's a downleg in this afternoon's future, then it probably won't be substantial without first probing the open's highs. Not unless S&Ps greet the FOMC news from negative territory.


Games People Play - Fil Zucchi - 10:16 AM

With Boom Boom a mere four hours away from revealing the truth about the state of the financial universe, "bookmakers" the world around are betting on the following.

  • That he will soften the bias, and that he will not soften the bias toward tightening. Polar opposite expectations, I know, but there is a lot of money betting on both.

  • That if the words "sub-prime" appear in the statement - unless immediately diluted by words suggesting "sub-prime" is irrelevant - it will be just about the equivalent of changing the bias to a more dovish stand.

  • That inflation expectations are way too hot for the Fed's taste.


If you think the above is confusing, you are correct and that's why odds are the reaction after the announcement is likely to be wild and woolly. The sense I get from the folks I speak with is that equity players have left themselves very little room for a "disappointingly hawkish" statement; on the other hand, a dovish tone might be well received initially, only to give way to fears that the economy is sliding into a recession.

Enjoy the game!

No positions in stocks mentioned.

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