Tag Archives for " economics "
Why the Fed Is a Total Mystery Right Now
As US economic data has generally slumped as of late, traders have pulled back on their rate hike expectations relative to last week. You can see the trend in this chart plotting implied Fed rate hike odds for each of the next 5 FOMC rate decisions: Traders are now pricing in a 48.8% chance of a December rate hike, down from about 60% last week. That means we’re right back to being split down the middle. Some traders were also thinking the September 21 meeting was “live.” Now it looks like that’s off the table, as a mere 20% probability is being priced in. Unfortunately, we may not get much clarity soon. This week’s US economic calendar is pretty much empty. The next big releases are the August retail sales report next Thursday 9/15 (plus industrial production that day), and August CPI on Friday 9/16. And there isn’t much else between those reports and the next FOMC rate decision on September 21. So what else do we have to look at? Well, we have Fed officials Rosengren, Kaplan, Lockhart, and Kashkari out chattering over the next week. But only Rosengren is a current voting member of the FOMC. And besides, it’s getting harder and harder to reconcile all the hawkish chatter with the concurrent decline in US economic data. Check out this chart of the Citi US Economic Surprise Index, which measures economic data relative to expectations. The trend turned down hard with the weak Q2 GDP report on July 29, and it’s looking pretty sorry.
Continue Reading -->The Morning Hammer: Maybe the Fed Went Too Far
One key trend we’ve been pointing out here again and again has been the degrading trend in US economic data, culminating in yesterday’s trio of misses. Now all of a sudden, the market’s thinking that maybe the Fed went too far in pushing its rate hike case because we’ve seen such lousy data as of late. Traders are now pricing in a 52% chance of a December rate hike, down from 60% last week. September odds are down to 24% from 34% last week. Gold has been on a rampage while the dollar’s taking heat. Equities of course, are still going nowhere. SPX volatility is at a near 2-year low. We haven’t had a 1% SPX move since July 8, and we haven’t had a 1% down down day since June 27. I’m long VIX calls, so I have good reason to be bitter. But I’m also just plain bored out of my mind. Individual stocks are moving around nicely, but I’d love to see a little excitement in the broader indices. Chipotle (CMG) is up this morning on news that Bill Ackman’s Pershing Square took a 9.9% position. Ackman’s going after the board to shake things up. Grovery chain Sprouts Farmers Market (SFM) cut its earnings outlook on competitive pressures and ongoings deflation. Whole Foods (WFM) is down in sympathy with it, The economic calendar is pretty light with no market-moving reports, so it looks like we’ll be in a holding pattern today ahead of tomorrow morning’s ECB rate decision. Good luck… staying awake, that is.
Continue Reading -->T3’s Take 3: Gold Screams on NFP Miss
Join Next Week’s Training Sessions! They’re FREE! Tuesday 9/6: Day and Swing Trading Signals You Need to Know Thursday 9/8: How to Start Trading Forex Like a Pro ********* By Michael Comeau 1) NFP Miss Today we got the big bad August nonfarm payrolls report, and unfortunately, it disappointed. The 151K headline number missed expectations by 29K, and unemployment came in below consensus. And perhaps most importantly, average hourly earnings rose just 0.1% month-over-month, missing the 0.2% consensus. The Fed doesn’t make decisions based on a single data point, but watch the trend: US economic data has been on a downtrend as of late, as you can see in this chart of the Citi US Economic Surprise Index: 2) Gold Rocks – But Has Anything Changed? Gold had been selling off since mid-August on an endless stream of hawkish comments from Fed officials. However, with today’s NFP miss, traders decided to once again buy what now looks like an oversold dip. Gold rose 0.9% to $1329/oz and the gold miners ETF (GDX) rallied an impressive 3.6%, putting it up 7.3% in 2 days. However, the rally in gold does not imply that traders believe the Fed will go on hold. The US dollar was remarkably strong today after an early dip, and US Treasury yields rose. The dollar and yields tend to go up when traders believe the Fed will raise rates. 3) Bulls Fight Back In recent days, tension clearly appeared on the tape, but today’s NFP miss wasn’t bad enough to derail the bull. The S&P 500 rose 0.4% to 2179.98, while the Russell 2000 rose an impressive 1.0%. And much to my chagrin, the VIX fell 11.4% to 11.95. Regional banks were strong again, and we also saw a nice intraday rally in large-cap tech names, with Apple (AAPL) pushing up 0.9% to $107.76. On the downside, biotech (IBB) fell on Presidential Candidate Hillary Clinton’s drug pricing plan, which is aimed at curbing “unjustified” drug price hikes. P.S. Don’t forget to check out our FREE trader training sessions.
Continue Reading -->5 Thoughts on the Disappointing August Jobs Report
Now that we’re past the initial reaction to the weaker-than-expected August NFP report, let’s take an in-depth look at how the market’s doing: 1) Oil Wins! Oil is the big winner off the NFP report. WTI crude was red in the early going, but it’s now up 2.4%, and the Vaneck Vectors Oil Service ETF (OIH) is up 1.4%. And XLE is the best performing S&P sector ETF with a 1.1% gain. Plus, this is happening despite a major currency move… 2) Impressive Dollar USDJPY dropped to 102.811 post-NFP, but it’s rocketed up to 104.176. This really surprised me. I thought the light numbers would result in profit-taking, but I guess traders are happy to keep riding this freight train to the moon. This, along with the big selloff in bonds, is helping banks, especially the regionals. By the way, do you want to learn to trade forex? Sign up for next week’s FREE webinar. 3) Miners Rock Even with the dollar strength, gold is up 0.4% on the NFP miss. And the gold miners (GDX) are having a great day with a 1.9% pop following yesterday’s solid gain — wow. But remember, GDX just dropped from $31.79 on August 12 to $25.17 yesterday, so the pendulum had to eventually swing back the other way. 4) Rate Hike Odds Fed rate hike odds are essentially unchanged. Fed funds futures imply a 30% chance of a September rate hike, down from 34% yesterday. But December is holding steady at 60%. Traders will probably wait to see September numbers before really freaking out over employment data. 5) Fed Heads Fed officials will immediately continue their press tours, and there’s a chance they’ll comment on today’s jobs numbers. Lacker will be speaking in Richmond today at 1:00 p.m. ET And we have Williams next Tuesday and Rosengren next Friday. Only Rosengren is a voting member of the FOMC. The economic calendar is pretty light next week, so maybe these folks will get even more attention than usual, especially if they get feisty. P.S. Check out our FREE webinars and learn from our top traders!
Continue Reading -->August NFP Report Instant Analysis: Did the Fed Fool Us Again?
Oh man, did we just get fooled by the Fed again? Fed heads have been selling a super-hawkish narrative for weeks but today’s job report was just a little bit shaky. The 151K headline number missed expectations by 29K. And perhaps most importantly, average hourly earnings rose just 0.1% month-over-month, missing the 0.2% consensus. We’re seeing a predictable reaction: gold is ripping, up almost 1%, and the gold miners (GDX) are up 4.5%. Meanwhile, the US dollar is sagging and Treasuries are up. SPX futures are now about 10 handles off morning lows. I’d have though they’d sag on the report because markets have acted as if they’d welcome a rate hike. Fed funds futures are now pricing in a 58% chance of a December rate hike, down from 60% earlier today — that’s not much of a change. Remember, the Fed doesn’t make decisions based on a single data point, so let’s not go overboard. And of course, keep in mind that we often see multiple market reactions and counter-reactions on NFP days. We’ve already seen crude oil round-trip its reaction move and start yet another move: We could see ANYTHING by the close today… even actual volatility.
Continue Reading -->The Morning Hammer: Apple Slammed on Tax Ruling
Don’t Fear Forex… Attend Kurt forex’ free webinar today after the close and learn why so many stock and options traders are embracing the lucrative world of forex. ******* Shares of Apple (AAPL) are getting slammed this morning after the European Commission found that Ireland gave the iPhone maker an illegal “selective tax treatment. Apple has been ordered to repay 13 billion euros ($14.5 billion) plus interest, though Ireland will appeal the ruling. The stock traded as low as $103.50 in the early going but it’s come back a bit. Apple has well over $200 billion in cash so it won’t have any problem fitting the bill. The real issue is whether investors will start worry about the tech sector’s ability to cut taxes by using Ireland-based entities. NDX futures are down -0.2%, so it seems that no one really cares for now. But keep an eye out on this issue. Overseas markets are mostly in the green today, led by the banks, even with negative economic data. Euro-area economic confidence, UK mortgage approvals, and Adzuna advertised salaries were all weak. UK economic data has generally been solid post-Brexit, so these numbers are bucking the trend. Check out this of the Citi UK Economic Surprise Index (starts on 6/1/2016): The dollar is up and gold is down on increased confidence that the Fed is ready to move. The gold miners (GDX) look especially weak this morning. The news flow is pretty slow and the economic calendar is light, with just S&P CoreLogic home price and consumer confidence numbers on tap. Fed Vice Chairman Fischer appeared on Bloomberg TV this morning, expressing optimism that productivity growth will rebound. He also said that incoming economic data will determine the trajectory of interest rate increases. So for now, it looks like we’re back to the range, which makes sense ahead of Friday’s big jobs report. Maybe that will give traders an excuse to start taking real action? One can dream… P.S. Don’t forget to sign up for our FREE forex training session!
Continue Reading -->The Morning Hammer: Let’s Eat Some Dove Soup
Traders are buying into the Fed’s hawkish narrative. On Friday, FOMC Chair Janet Yellen very clearly put rate hikes on the table, and market are buying in. Fed Funds futures now imply a 65% chance of a December rate hike, up from 47% a week ago. And September is up to 42% This has gold and silver slightly offf and the dollar up huge Overnight, Italian business manufacturing missed expectations, as did Greek GDP, Swedish retail sales, and Hong Kong retail sales. Australian home sales were also weak. European equity markets are red, while SPX futures are flat. We’ve got some important economic data today, with personal income/spending, PCE deflator, and Dallas Fed numbers on tap. Even though the Fed’s signalling pretty hard that rate hikes are en route, folks will be watching the PCE deflator closely since it’s the Fed’s preferred inflation indicator. If it’s strong, I’d assume folks push those rate hike odds up even more, and we could probably see an intraday selloff in US Treasuries (which are up fractionally in the early going). Beyond that, it looks like we’re going to close out August the way we came in — quietly. The VIX has been ticking up after putting in what looks like a major low on August 8, but we’re still not seeing much actual movement. We haven’t had a 1% down day in SPX since June 27. And it feel slike the more people look for one, the less likely it is to happen. Volatility is mean reverting. Things go crazy, and then they get quiet. And things get quiet, and then they go crazy. This quiet period today though, it’s one for the ages. I just wanna wake up, you know?
Continue Reading -->T3’s Take 3: Janet Yellen Sets Off a Rollercoaster
1) Fed Follies: Jackson Hole Edition Traders were looking for a hawkish Yellen and a hawkish Yellen is what they got. At her highly-awaited Jackson Hole speech, Federal Reserve Chair Janet Yellen said that the case for rate hikes “has strengthened in recent months,” echoing recent hawkish comments from other Fed officials. Initially, the market made the obvious moves — the US dollar spiked, and gold and US Treasuries collapsed. However, the moves were very quickly retraced, with the dollar and gold falling. This implied the market was having a massive “sell the news” reaction to Yellen meeting market expectations. 2) The Reaction to the Reaction to the Reaction Following that counter-reaction, the big hawk trade — strong dollar and weak gold/bonds — continued. Here is an intra-day chart of the US dollar index starting at 8:00 a.m. ET, which is a pretty good illustration of the market reaction to Yellen’s speech: As you can see, the dollar briefly dove before skyrocketing into the equity market close. We saw similar zaniness in gold and US Treasuries. 3) Equity Traders Take a Little Ride Fed funds futures now imply a 63% probability of a December rate hike, up from 47% a week ago. The prospect of higher rates had equity traders taking profits. At one point, the S&P 500 looked like it may have its first 1% down day since June 27, and the VIX hit 14.93, a level not seen since early July. However, stocks crawled up into the close, with the index finishing down -0.2% at 2169.04. Stocks that benefit from lower interest rates, like utilities, gold miners, and real estate names, took major hits. On the plus side, biotechnology had a solid up day after afternoon failures on Wednesday and Thursday. P.S. Want to up your trading skills? Check out our free webinars! Monday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Personal Income (Jul): exp. 0.40%, prior 0.20% 08:30 Personal Spending (Jul): exp. 0.30%, prior 0.40% 08:30 Real Personal Spending (Jul): exp. 0.20%, prior 0.30% 08:30 PCE Deflator MoM (Jul): exp. 0.00%, prior 0.10% 08:30 PCE Deflator YoY (Jul): exp. 0.80%, prior 0.90% 08:30 PCE Core MoM (Jul): exp. 0.10%, prior 0.10% 08:30 PCE Core YoY (Jul): exp. 1.50%, prior 1.60% 10:30 Dallas Fed Manf. Activity (Aug): exp. -3, prior -1.3 Global Economics All Day GBP Bank Holiday 19:30 JPY Household Spending y/y 21:30 AUD Building Approvals m/m Earnings Before Open: None of significance After Close: None of significance
Continue Reading -->Gold Screams Afters Yellen Fails to Move the Needle
Traders were looking for a hawkish Yellen and a hawkish Yellen is what they got. At her highly-awaited Jackson Hole speech, FOMC Chair Janet Yellen said that the case for rate hikes “has strengthened in recent months,” echoing recent hawkish comments from other Fed officials. Initially, the market moved as we expected — the US dollar spiked, and gold and US Treasuries collapsed. However, the moves were very quickly retraced. Here’s the dollar index: Here is gold (GLD): The junior gold miners (GDXJ): TLT: Crude oil is also on FIRE: So we are getting the ‘sell the news’ scenario I presented in today’s Morning Hammer column. (not that I bet on it…) Since Yellen delivered exactly what the market expected, the hawk trades (gold down, Treasuries down) aren’t getting any additional follow-through. In fact, rate hike expectations have actually FALLEN since the speech. Earlier today, Fed Funds futures were pricing in a 57% chance of a December rate hike. That number is down to 55% so Yellen did not move the needle. Biotech (IBB) also ripped off morning lows and is up 1.5%. The VIX is down 8.4%. Meanwhile, SPX fell about 5 points before extending higher above 2187. We’ve gone 34 days without a 1% move in the SPX. That streak may indeed break today. Next step: let’s see if these counter-reactions hold. Fed says often see multiple dramatic moves before the closing bell hits.
Continue Reading -->The Morning Hammer: Will Yellen Pull a Fast One at Jackson Hole?
All eyes are on FOMC Chair Janet Yellen’s 10:00 a.m. ET speech in Jackson Hole. Fed officials have been out in force the past few weeks pushing a hawkish narrative, and the market has responded. Fed fund futures now imply a 57% chance of a December rate hike, up from 47% a week ago and just 9% after the 6/24 Brexit. 57% is far from certain. However, the trend has been up, and the trend is what counts. This has been pushing up bank stocks and putting pressure on gold, particularly the miners (GDX). So now we’re at an interesting juncture. If Yellen indeed comes out hawkish as many traders expect, I wonder if we get an immediate spike in the dollar and dip in gold, with both moves getting reversed by the end of the day. I almost feel like all the Fed heads have been overselling the idea that rate hikes are coming, which could set up a sell the news situation. On the flip side, if we get a repeat of June — doves flying when everyone’s looking for hawks — expect a monumental rally in GDX. SPX futures are as flat as an ironing board, and crude oil is down fractionally. Aside from all the Fed-sanity, I’m really interested to see what biotech does. For 2 straight days, IBB has gone from first in the morning to worst in the afternoon on heavy volume. (see chart) The alleged cause has been Presidential candidate Hillary Clinton’s attacks on Mylan’s (MYL) pricing practices, which raises fears about future price controls. The reality is that no politician — not even the President of the United States — can simply wave a magic wand and lower drug prices. So I wonder if traders have been looking for excuses to sell, and Hillary happened to serve it up. IBB is down -16% on the year, but it’s also up 19% from its February low. We’ve also got GDP, U. of Michigan Sentiment, and the Baker Hughes Rig Count on the economic calendar. So maybe, just maybe we’ll get some excitement today after 34 days without a 1% move in SPX.
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