MARKET REPORT
(Unburdened by what has been)
Cyprus Bourse
You were found in clear conditions. But you’re handsome in the Fog.
Day in Review:
Today:
(Kamalanomics: Govt-manipulated data with un-reported historic downward revisions to make the economy look more favorable):
DATA:
– FED CUTS BY 50
– Fed cuts by 50bps
– Dot plot signals a further 50bp of easing in 2024
– Powell says they will decide meeting by meeting, and to not look at today and think this is the new pace
– In June, 4 FOMC members expected no rate-cuts in 2024, 7 members expected 1 rate-cut in 2024, 8 members expected 2 rate-cuts.
– In September, only 2 FOMC members had priced in 2 rate-cuts by year-end, 7 more saw 3 rate-cuts, 8 more saw 4 cuts by the end of 2024 and one lone uber-dove (Goolsbee?) expected 5 rate-cuts in 2024
– Both housing starts and building permits topped forecasts
– Hotter-than-expected UK CPI
COMPANIES:
– General Electric increased to a near 7-year high of 184.65 USD. Over the past 4 weeks, General Electric gained 7.71%, and in the last 12 months, it increased 58.26%.
– Meta increased to an all-time high of 544.14 USD. Over the past 4 weeks, Meta Platforms, Inc. gained 2.8%, and in the last 12 months, it increased 78.23%.
GENERAL:
– Euro Bourses close Lower
– Larger crude draws than expected in EIA
– Hand-held radios explode in Lebanon.
– Equities down, Treasuries down, Crude down, Dollar up
Coming Up:
– Australian employment!!!
– US Philly Fed Index
– BoE
Speakers:
– ECB’s Schnabel; Norges Bache Bache; BoC’s Vincent
MAJORS:
DX:
– FOMC dump then Powell speak squeeze
FED ANNOUCEMNET:
The FOMC cut rates by 50bps, taking the target for the federal funds rate to 4.75-5.00%, more in fitting with money market pricing before the release rather than the analyst consensus of 25bps. There was one dissenter; Governor Bowman opted to vote for a smaller 25bp rate reduction.
Within its projections, the 2024 rate forecast was revised down to 4.4% from 5.1%, which implies a further 50bps of easing from current levels.
The projections showed that nine of the 19 policymakers see the policy rate above the median forecast for 2024, nine at the median, while one sees it below that.
The statement saw some changes: it noted inflation has made further progress but remains somewhat elevated, and it added it has gained greater confidence inflation is moving sustainably towards 2%, and judges risks to achieving its goals are roughly in balance.
However, it left its guidance unchanged, noting that “the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” but it said that it is strongly committed to “supporting maximum employment” and returning inflation to its 2% objective (previously it only referenced inflation).
Further out, the FOMC’s median projections see the 2025 rate at 3.4% (prev. 4.1%), and end-2026 dot at 2.9% (prev. 3.1%), where it also sees the neutral rate (2.9% vs prev. 2.8%). Money markets are still pricing in a risk of another 50bp rate cut with 74bps priced through year-end to 4.00% (prev. 4.2% pre-meeting). However, looking ahead to 2025, rates are seen bottoming at 2.8% in October 2025, with the volume of rate cuts that markets are pricing unchanged from before the announcement.
Elsewhere in the SEPs, the unemployment rate was revised up throughout the forecast horizon, but the longer run was unchanged at 4.2%; PCE and Core PCE were revised down for 2024 and 2026, while growth saw a revision lower in 2024 but was unchanged throughout the forecast horizon
POWELL:
Fed Chair Powell used the press conference to stress that the Fed is not on a pre-set path and that decisions will be taken on a meeting-by-meeting basis (something he stressed several times), noting the Fed can go quicker or slower, or even pause if it is appropriate – maintaining maximal optionality in their guidance.
However, he did also add that no one should think that this is the new pace. He also toed his usual line on SEP meetings that projections are not a plan or decision and also highlighted that the range of views in the SEPs are varied.
When asked about why the Fed moved by 50bps, he said there has been a lot of data, including in the blackout period, but he highlighted how the BLS labour market revisions show that payrolls may be revised down – he later stated the Fed will mentally tend to adjust payroll numbers based on the QCEW.
He also stated that downside risks to employment have increased.
Elsewhere, he did not seem too concerned about the economy, noting that retail sales data and Q2 GDP indicate the economy is growing at a solid pace, which will also support the labour market. He also noted how they are not seeing rising claims or layoffs, but they are not waiting for that to happen, the time to support the labour market is when it is strong.
Powell said the unemployment rate is still at a healthy level, participation is at a good level, quits have come back down to normal levels, and vacancies are still at a pretty strong level. Wage increases are still a bit above being consistent with 2% inflation.
On inflation, Powell said they will ultimately get down to 2% inflation. When asked if 50 means the Fed are behind the curve, Powell stressed the Fed does not think this is the case, noting they have been patient where other central banks have already started to cut. He said they are moving at a pace that they think is appropriate, but no one should look at today and think this is the new pace.
On the Neutral Rate, Powell said it feels that the neutral rate is probably significantly higher than it was pre-pandemic, adding the Fed is recalibrating their policy over time to be more neutral.
On the balance sheet, Powell said the Fed is not planning to stop the run-off any time soon, noting that both balance sheet and policy rate moves are a form of normalisation.
EQUITIES:
The S&P 500 also briefly hit a new record high. However, once Powell started speaking, all the majors reverted lower (back into the red)
EUR:
– DAX -0.03% 18,720
– FTSE -0.68% 8,254
– CAC -0.57% 7,445
– ES50 -0.50% 4,836
US:
– SPX -0.29% 5,618
– NDX -0.45% 19,344
– DJIA -0.25% 41,503
– RUT +0.04% 2,206
Sectors (W to S): Utilities -0.77%, Technology -0.51%, Consumer Staples -0.44%, Materials -0.38%, Real Estate -0.30%, Financials -0.28%, Consumer Discretionary -0.19%, Health -0.16%, Industrials -0.09%, Communication Services +0.02%, Energy +0.25%.
General Mills: Q1 profit fell 14% Y/Y due to inflation and pressure on margins and there was also cautious commentary surrounding China and expects FY category dollar growth to be below long-term growth projections. Note, did beat on revenue and EPS for the quarter.
BLK is partnering with MSFT to launch a USD 30bln AI investment fund to build energy infrastructure and data centres, while NVDA will advise on factory design and integration, FT reports.
Boeing: CEO said it is initiating temporary furloughs over the coming days and to impact many US-based execs, managers, and employees; adds it is important they take difficult steps to preserve cash and ensure it can successfully recover. Furloughs will affect tens of thousands of Boeing employees.
GOLD/SILVER:
– Silver fell toward $30 per ounce, pulling back from its two-month high after the Federal Reserve implemented a 50 bps rate cut, the first since 2020.
Although the rate cut was widely expected, there was uncertainty whether the Fed would opt for a more cautious 25 bps reduction. The central bank also signaled additional 50 bps cuts later this year, with a full percentage point reduction anticipated for next year.
Meanwhile, upcoming monetary policy decisions from the Bank of England and the Bank of Japan, along with weak economic data from China, added to the pressure on silver. China, the world’s largest metals consumer, reported underwhelming figures for industrial output, retail sales, and fixed asset investment in August, alongside a rising urban unemployment rate and the steepest home price decline in nine years.
Still, during the regular press conference, Chair Powell noted that the Fed is not in a rush to ease and the dot plot projections for the fed funds rate are not a policy plan.
OIL:
– WTI crude oil futures fell 0.4% to settle at $70.9 per barrel on Wednesday, breaking a two-day winning streak despite the Federal Reserve’s first interest rate cut since 2020. The Fed’s decision to lower rates by 50 basis points, more than expected, initially supported prices, but the overall market response remained subdued.
Additionally, EIA data revealed a larger-than-expected decline in US crude inventories, which fell by 1.63 million barrels to 417.5 million, surpassing the forecasted 500,000-barrel draw.
Ongoing demand concerns, especially from China, linger after disappointing economic data deepened fears about the nation’s slow recovery.
Meanwhile, traders continue to watch rising geopolitical tensions in the Middle East and the potential risk of supply disruptions.
BONDS:
US 1-MO: 4.802 -0.126
US 6-MO: 4.533 -0.038
US 1-YR: 3.993 -0.011
US 5-YR: 3.492 +0.062
US 10-YR: 3.713 +0.071
US 30-YR: 4.031 +0.078
2’s/10’s: 0.09 +0.04
– The yield curve (2s10s) crashed into ‘inversion’ briefly before bear-steepening back up to recent highs
CRYPTO
– Microstrategy raises $875m in convertible notes, plans futher BTC purchases
– In the minutes following the FOMC decision, the price of bitcoin {{BTC}} shot up 1.2% to $61,000, then fell below $60,000, mostly flat over the past 24 hours.
Cryptocurrency-related stocks also gave up their gains. MicroStrategy (MSTR) shares gained 1.5% through the day, while crypto exchange Coinbase (COIN) and investment firm Galaxy (GLXY) were flat to negative, similarly to most bitcoin miners including Marathon Digital (MARA) and Riot Platform (RIOT).
KEEP DOING WHATS WORKING, STOP WHAT ISNT
Best of luck out there. Let the market come to you
Post of the day:
https://www.youtube.com/shorts/wQD3hHbIc1M
Song of the day:
https://www.youtube.com/watch?v=F5deflR3Al4
Joke of the Day:
https://www.youtube.com/watch?v=_bWt__tV-Zg
(Seize all assets of Duke and Duke enterprises)
I can be contacted should anyone have any questions, input at [email protected] during US hours of EST 9am until 5pm
We do our best to provide correct information and pricing. We do not accept liability for error. All pricing listed has been taken care and checked but no liability assumed in error. As ALWAYS, any advice given is general in nature and is not suited to each traders individual: situation/time-frame/goals/financial circumstance/risk profile/loss mechanics etc We offer ideas for trades from time to time, we accept no liability for results, they are to be traded on your discretion and responsibility.
For those unaware the Market Report can also be found on our website:
https://theconcepttrading.com/blog/