The Fed minutes read more hawkish than the market expected, though they softened some of what Williams and Jefferson had said the week before, and Waller pushed back against colleagues offering forward guidance.
Mott Capital Management, LLC
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The move in yields last week was significant but not entirely unexpected. What was surprising was seeing such a large repricing in a single day following economic data that does not ordinarily generate this kind of market reaction.
The Fed seems to be less inclined to push yields lower this time. In November 2023, it changed its statement to refer to “tighter financial and credit conditions”, rather than just “tighter credit conditions”.
The most important thing heading into this week is not only the economic data and its potential impact on the Fed’s September rate decision and Treasury rates, but also Broadcom’s results
The most exciting thing this week is likely to be the Fed minutes. But what are the different market indicators telling us what the next few days are likely to look like?
Stocks finished higher for the third day in a row, recouping all of the losses the S&P 500 had suffered since mid-July. Most of the move was driven by the mega-cap technology stocks that had declined during that period.
Semiconductor stocks are approaching their lower Bollinger Band. The group could continue to decline this week. even as its bullish momentum appears to have become more balanced.
For now, the FED's new chairman is sending the message that he will be tough on inflation — and the jobs report gives him cover to do so, even though the nonfarm payroll number came in surprisingly low.
The point is that the index can fall sharply if the stocks that drove it higher begin to fall sharply. And there is no way of knowing how far those stocks could decline because nobody really knows what they are worth.
This week brings OPEX, a Bank of Japan rate decision, an FOMC rate decision, and a Bank of England rate announcement. As a result, market mechanics should be on full display.
Oil looked poised to break out today but could not clear the trendline. At least for now, oil bulls will have to wait and see if the market can gather enough momentum tomorrow to finally push through.
What is odd about this whole thing, regarding volatility, is that the ratio between oil and gold volatility is not nearly as wide. Clearly, oil and gold vol are elevated, and S&P 500 vol is not.