Futures are off modestly after the usual overnight VIX slump. Markets are focused on this week’s economic data, with CPI coming out Wednesday and PPI and initial claims on Thursday.
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Tag: FOMC
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All Eyes on Inflation Data
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Minute by Minute
The Fed will release its June minutes this afternoon, potentially shedding some light on why they paused their rate hikes. But, thanks to plenty of Fedspeak – including Jay Powell’s testimony – we already know that they are as confused and conflicted as everyone else. As always, they are more concerned about markets than anything else.
Futures are off about 0.50% as we approach the open.
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Durable Goods Orders Argue for More Hikes
May durable goods came in much higher than expected: +1.7% versus -1.0 consensus. Goods ex transportation also beat, at 0.6% versus 0.0% consensus. Suffice it to say these are not the data that support a continued pause, let alone a reversal.
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Powell: Inflation Not Over
“Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” Powell asserted in prepared remarks in advance of his testimony before the House Financial Services Committee.
Our charts certainly agree. As posted last week, there is little chance of inflation not bouncing back up unless oil and gas prices collapse from current levels.
Futures are off moderately in anticipation of Powell’s truth-telling.
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FOMC Day: Jun 14, 2023
According to futures and talking heads, there’s a 94% chance that the Fed will pause its rate hikes this afternoon – though perhaps with a hawkish tilt. By our reckoning, equities have piled on at least 6% in the past few weeks in anticipation of this outcome.
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Charts I’m Watching: Jun 12, 2023
Futures ramped up past a key Fib level overnight on hopes that the Fed will pause any further rate hikes this week. Will SPX follow suit?
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Blowout NFP Complicates Fed’s Job
Non-farm payrolls exploded higher in May, tallying 339K versus 190K consensus. On the other hand, unemployment rose from 3.4% to 3.7%.
Futures initially slumped, as blowout job gains argue for further Fed tightening. But, VIX was hammered to lows of 15.12, a level not seen since Nov 2021, and the overnight ramp was salvaged, for now.
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Charts I’m Watching: May 30, 2023
The meltup continues on yet another after-hour VIX dump.
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Some Like It Hot
If you’re a retailer, you might be thrilled with the personal income and personal spending beat last month (0.4% vs 0.3% exp and 0.8% versus 0.4% expected.) If you’re a manufacturer, you might be pleased with durable goods coming in at a +1.1% versus the -1.3% expected.
But, if you’re a member of the FOMC, you have to be chagrined that those hot numbers, combined with hotter core and headline PCE and tightening credit conditions, will force tighter monetary conditions.
The algos agreed for a few minutes, but were quickly reminded of the requirement to take their cues from VIX.
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Mixed Messages
Futures bounced off our 50-day MA target and are up sharply on NVDA‘s blowout earnings/forecast, egged on by Speaker McCarthy’s latest promise that a debt ceiling resolution is on the way.
Of course, this bullishness is unwarranted from a Fed rate hike perspective. Initial claims came in below expectations and Q2 GDP (the deflator was 4.2% vs 4.0 expected) was hotter than expected. Not exactly a scenario that supports a pause/drop.Unless VIX plunges below 18.58, this ramp job should be faded.
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