Five Things You need to Know: Fed Meets to Decide Fate of Final 105 Minutes of Trading Day
Beware, for today a mighty wind will soon blow.
Kevin Depew's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Fed Meets to Decide Fate of Final 105 Minutes of Trading Day
Beware, for today a mighty wind will soon blow. The Federal Reserve Open Market Committee will announce is interest rate decision at 2:15 pm Eastern Standard Time this afternoon; a decision that could ultimately decide the fate of the final 105 minutes of this trading day.
Fed Funds Futures are currently pricing in a 80% chance of a 25 basis point rate cut, a 0% chance of a 50 basis point rate cut and a 20% chance of no change to the Fed funds rate.
Conventional wisdom holds that the Federal Reserve will take steps today to begin reining in expectations for additional rate cuts. We're not so sure. For while all eyes are on what the FOMC says, we're watching what they do, which is continue to press ahead with the most unorthodox credit-funding efforts and the most wide-ranging expansion of central bank authority since the Great Depression. So we are far less concerned with what the Fed says than with what they are actually doing.
The Financial Times this morning went front page with a story detailing Treasury's push for granting the Federal Reserve new regulatory powers. The proposal would essentially grant the Fed the authority to walk into any bank, hedge fund or other entity and demand curtail any strategy it deems is putting financial stability at risk.
Meanwhile, inside the FT was a longer story suggesting the debt crisis is, in fact, now a "passing storm." Is this the ninth inning for the Fed's crisis management? Or is it, as we believe, the second or third?
Like our beloved New York Mets', the Fed's slogan seems to be, "Ya gotta believe." Unfortunately, we know how that turned out last year for the Mets.
2. Where We Stand
Meanwhile, regardless of what happens in the final 105 minutes of trading today, below is where we stand with the point and figure bullish percent indicators for equities, based on Investors Intelligence data.
As you can see, demand remains in control of stocks, and field position is reasonable.
- NYSE Bullish Percent: Xs (Positive) 43.5%
- S&P 500 Bullish Percent: Xs (Positive) 50.6%
- Nasdaq Composite Bullish Percent: Xs (Positive) 31%
- Nasdaq-100 Bullish Percent: Xs (Positive) 50%
- Russell 2000 Bullish Percent: Xs (Positive) 45.2%
- NYSE High-Low Index: Xs (Positive) 68.9%
- Nasdaq High-Low: Xs (Positive) 30.2%
3. Wal-Mart Raises Deflationary Ante
Right, like you can even try to raise something that is deflationary. Be that as it may, today we ran across a story where Wal-Mart (WMT) is cutting prices on a host of products from shampoo to cereal and other groceries.
The interesting thing about this is how it interacts with the surface rise in inflation expectations. With Wal-Mart pricing consumer discretionary (and now even certain staples) lower, what if in the second and third quarter commodities come down in price, particularly energy and ag-related commodities, what will that do to inflation expectations?
At that point, rather than relieving inflationary pressures led by the rise of a small group of commodities, we could instead see unmasked the larger, secular deflationary trends riding along below the surface.
4. No Comfort for Old Men
Speaking of discomfort, the ABC Consumer Comfort Index reached another new low for the year this week. The index stands at -41 on its scale of +100 to -100, its second week at or below -40 – a level not seen since July 1993, and well below the long-term average of -10. The record low, -50, was reached in early 1992..
5. Long, Strange Trip Concludes
Today we mourn the loss of Swiss chemist, Albert Hofmann, the man who in 1938 discovered lysergic acid diethylamide, otherwise known as LSD. Hofmann passed away at his home in Burg im Leimental at the age of 102.
According to stories, Hofmann accidentally became the drug's first human test patient when a drop of lysergic acid diethylamide came into contact with his finger during an experiment.
""I had to leave work for home because I was suddenly hit by a sudden feeling of unease and mild dizziness," Hofmann wrote in a memo to company bosses according to Associated Press.
"Everything I saw was distorted as in a warped mirror," he said, describing his bicycle ride home. "I had the impression I was rooted to the spot. But my assistant told me we were actually going very fast."
Three days later, Hofmann experimented with a larger dose, the AP story said. The result was the world's first scientifically documented bad trip.
"The substance which I wanted to experiment with took over me. I was filled with an overwhelming fear that I would go crazy. I was transported to a different world, a different time," Hofmann wrote.
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