Thursday, April 6, 2017
Considering we don’t really ramp up Q1 2017 earnings season until this time next week, we do have some big developments at the end of this week that have already begun to affect the market. Yesterday, notes on the Fed minutes from the most recent FOMC meeting triggered a sell-off in afternoon markets that was shift and profound. And this morning’s jobs figures precede a major powwow with President Trump and Chinese President Xi Jinping.
First, a spotlight shone on balance sheet issues in the Federal Treasury cause tremors in market trading once the notes from March’s FOMC meeting were released yesterday afternoon. Instead of waiting until sometime next year, the Fed looks ready to reduce its balance sheet obligations this year instead. Even more, Fed participants actively discussed the possibility of bringing an immediate end to reinvestments, instead of folding them in gradually, month after month.
On CNBC’s Squawk Box this morning, resident economist Steve Liesman helped break down the complex understanding of this issue: buying treasuries amounts to an interest rate cut (once actual interest rates couldn’t be cut lower than 0), so selling treasuries would necessarily have the opposite effect. In any case, Liesman sees the current regime — going back to former Fed Chair Ben Bernanke’s QE program — coming to an end. This would necessarily point to the end of “easy money” within the U.S. economy. Investors wasted little time repositioning themselves accordingly.
Initial Jobless Claims fell back to within the very strong 225K-250K weekly range where we’d been for a coupler months previously. Last week’s slightly upwardly revised jobless claims to 259K fell precipitously to 234K — a very positive number in terms of overall weekly claims. We are now back to those 40-year lows we’d been discussing weeks ago, when the U.S. labor market was far smaller than it is today. Continuing claims also fell to a smudge under 2.03 million, still above the psychologically pleasing 2 million even, but not by much.
Speaking of jobs and economic ramifications, President Trump meets with Chinese President Xi today down at Mar-a-Lago, not the White House. Perhaps this will prompt a more frank discussion between the leaders of the top two economies in the world today. Generally speaking, summits like this bring about scripted statements from both leaders, wherein they each try to score politic al points at home. But with diplomatic jobs in the Trump administration still unfilled, including no Ambassador to China today, telegraphing the results of this meeting should prove very difficult to do.
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
Image: Bigstock
Yesterday, Today and Tomorrow
Thursday, April 6, 2017
Considering we don’t really ramp up Q1 2017 earnings season until this time next week, we do have some big developments at the end of this week that have already begun to affect the market. Yesterday, notes on the Fed minutes from the most recent FOMC meeting triggered a sell-off in afternoon markets that was shift and profound. And this morning’s jobs figures precede a major powwow with President Trump and Chinese President Xi Jinping.
First, a spotlight shone on balance sheet issues in the Federal Treasury cause tremors in market trading once the notes from March’s FOMC meeting were released yesterday afternoon. Instead of waiting until sometime next year, the Fed looks ready to reduce its balance sheet obligations this year instead. Even more, Fed participants actively discussed the possibility of bringing an immediate end to reinvestments, instead of folding them in gradually, month after month.
On CNBC’s Squawk Box this morning, resident economist Steve Liesman helped break down the complex understanding of this issue: buying treasuries amounts to an interest rate cut (once actual interest rates couldn’t be cut lower than 0), so selling treasuries would necessarily have the opposite effect. In any case, Liesman sees the current regime — going back to former Fed Chair Ben Bernanke’s QE program — coming to an end. This would necessarily point to the end of “easy money” within the U.S. economy. Investors wasted little time repositioning themselves accordingly.
Initial Jobless Claims fell back to within the very strong 225K-250K weekly range where we’d been for a coupler months previously. Last week’s slightly upwardly revised jobless claims to 259K fell precipitously to 234K — a very positive number in terms of overall weekly claims. We are now back to those 40-year lows we’d been discussing weeks ago, when the U.S. labor market was far smaller than it is today. Continuing claims also fell to a smudge under 2.03 million, still above the psychologically pleasing 2 million even, but not by much.
Speaking of jobs and economic ramifications, President Trump meets with Chinese President Xi today down at Mar-a-Lago, not the White House. Perhaps this will prompt a more frank discussion between the leaders of the top two economies in the world today. Generally speaking, summits like this bring about scripted statements from both leaders, wherein they each try to score politic al points at home. But with diplomatic jobs in the Trump administration still unfilled, including no Ambassador to China today, telegraphing the results of this meeting should prove very difficult to do.
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>