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Market Commentary

FOMC Meeting?


Posted on November 13, 2018

Was there a FOMC meeting last Thursday? The news has been busy with post-election analysis along with a very choppy stock market making headlines almost every day. Yesterday was no exception, as most of us were off work, the market struggled (again) down over 600 points. Tech stocks continue to take the blame.

Good morning!

  • To the surprise of no one, the FOMC maintained its Fed funds target range at 2.00% to 2.25% at its meeting last week
    • The vote was unanimous 9-0 in keeping rates unchanged
    • The Fed reiterated its view of a robust economy and made no reference to the 8% October equity sell-off
    • It reaffirmed that household spending "continued to grow strongly" but acknowledged that business investment "has moderated from its rapid pace earlier in the year"
      • This was the only sentence that changed in last week's FOMC statement
    • Finally, the Fed restated that headline and core inflation remain near 2% and "risks to the economic outlook appear roughly balanced"
    • So, to recap: IOER was unchanged at 2.20%, the word "gradual" was retained, and the balance sheet didn't even get a mention
    • In one word - boring (as expected)
    • Next meeting is December 18-19th, which should bring us another rate hike and a press conference
      • Chair Powell has a discussion with Dallas Fed President Kaplan tomorrow on national and global economic issues
        • Will the Chair discuss topics and recent events in markets that did not make their way into last week's FOMC statement? Doubtful, but you never know
      • New San Francisco Fed President Daly, fresh off of her first vote on monetary policy, will speak later today on the economic outlook at a regional development conferenceā€¦based on her research, her policy leanings are similar to the former San Fran President WIlliams
  • U.S. oil prices entered a bear market, closing down at $60.67 a barrel, thanks to worries over rising U.S. crude inventories and slowing global demand
    • West Texas Intermediate crude is now down 21% from its Oct. 3rd peak
    • Yesterday, adding to oil supply concerns, OPEC is likely to agree to an oil production cut when it meets next month in Vienna
      • This was after Saudi Arabia confirmed that it would cut its own oil supplies next month and Russia signaled that it could follow suit
    • Other commodities are struggling as well - copper has tumbled 18% in 2018, while sugar is down more than 15%
    • An article from the Financial Times regarding Saudi's production cuts
  • On Friday, consumer sentiment in November dropped 0.3 points to 98.3 from 98.6 in the prior month, but was above market expectations of 98.0
  • The New York Fed's Nowcast report Nowcast for the 4th quarter now stands at 2.7%
  • Treasuries rates are falling slightly, mainly due to lower oil prices and Brexit negotiations approaching and Italian budget/growth worries
  • Today we get the small business index, the NFIB, but Wednesday's CPI release will be the week's main event
    • Many are expecting a stronger number here, possibly a sign inflation is picking up slightly
    • Thursday's retail sales data will also be in the headlines, giving forecasters their first look into 4Q consumer spending
  • News
  • Dow futures are up 129 pts so far this morning
  • Treasuries
    • 2-yr: 2.90%
    • 10-yr: 3.17%
    • 30-yr: 3.37%
  • LIBOR
    • 1-month: 2.31%
    • 3-month: 2.62%

Have a great Tuesday!!!

Fred

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