Buzz Bits: Dow, Nasdaq Surge
Your daily Buzz & Banter highlights...
Editor's Note: This is a small sample of the content available on the Buzz and Banter.
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
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!
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter