Has he really turned dovish or did we just misunderstand him? To hear Neel Kashkari tell it, the Fed is nowhere near a pivot. This morning’s update will be posted after Powell’s 12:30pm speech before the Economic Club of Washington.
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Stocks were off about 1% again overnight – a regular occurrence lately – but are currently off the lows as we approach the opening bell.
ES should get a shot at backtesting its 10-day moving average, currently at 4091.25. If it doesn’t hold, things will at least get more interesting.
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Even down over 50 points, the market hasn’t even come close to undoing the craziness of the past two sessions.
Consider that VIX is off over 10% from yesterday’s highs with ES down over 1%.
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We asked yesterday “can the FOMC really be comfortable with very loose financial conditions?” Apparently so. Powell turned in one of his most dovish performances ever. The markets, already primed for a breakout, celebrated with a very definitive breakout.
Whether intentional or not, Powell turned dovish on the day that ES completed a golden cross (the 50-day moving average passed above the 200-day.) It can’t help but further inflame a market already on fire. If they can keep the VIX beatdown going, it might even last.
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It’s finally here, and things are no more clear than they were the last time. Markets have been pumped to the point of a golden cross…
…via the usual nonsense: a relentless hammering of VIX…
…and DXY…
…and the 10Y, which should finally backtest its 200-day MA.
The markets behave as though the Fed has turned dovish and there’s no chance of a recession – earnings or otherwise. But, we know it’s just the algos talking.
Will they be able to keep the plates spinning after Powell’s press conference? Can the FOMC really be comfortable with very loose financial conditions?
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The FOMC’s meeting gets underway today. Like most, this one seems very consequential. The Street is divided on whether or not the Fed has done enough to combat inflation as well as the necessity of a recession.
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Futures are off nearly 1% this morning, chiefly on worries that the Fed might be more hawkish on Wednesday than investors have assumed.
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Stocks rallied following yesterday’s beat across a wide range of economic measures, suggesting that investors don’t think the Fed will hike by any more than 25 bps next week.
Futures are off modestly following this morning’s data dump which shows income on track while spending missed amid a 5% annual increase in PCE.
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Q4 Adv. GDP came in at +2.9%, slightly above +2.6% consensus. But, durable goods orders spiked to +5.6% versus +2.9% consensus and -1.7% prior.
It’s a print that might be expected to embolden FOMC hawks in their deliberations next week. In fact, the market sold off — for all of 5 minutes. ES is now back to overnight highs after yesterday’s spasmodic BTFD ricochet off the 200-day moving average.
What gives?
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According to Reuters, Microsoft’s Chief Executive Officer, Satya Nadella, and other Microsoft executives used the words “caution” and “cautious” at least six times during yesterday’s call.
The stock, already locked into a falling channel from last November…
…reversed its initial pop and is leading the broader indices lower this morning. 
Remember, MSFT is the second largest component of the S&P 500. Futures are off over 1% as we approach the open.
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