Thursday, September 22, 2016
So the market celebrated the Fed’s decision not to raise interest rates yesterday by bidding stocks up more than 1%. Not that the decision was surprising, but that it blew away the outer crust of doubt that an unexpected rate hike that might have otherwise sucker-punched the markets yesterday afternoon.
Zacks’ Executive Vice President Steve Reitmeister openly questions the logic of the market’s moves like this one in this morning’s Profit from the Pros. He’s also on record as saying there’s no way the Fed will touch interest rates when it next meets in November, just days ahead of the General Election.
In Janet Yellen’s speech following the decision, she mentioned she and her cohorts are “struggling through a difficult set of issues” and that they are trying to find “the new normal.” We won’t see how contentious the meeting may have been until the minutes are released in a couple weeks, but more Fed presidents have an appetite for raising rates another quarter of a percent at some time this year. As 2016 begins to wind down, that would mean December.
Further, Yellen has lowered projections for a federal funds rate next year to 1.1% (1.6% previously). So even though the markets have been virtually assured rates will indeed rise, we’re still seeing a very cautious Fed heading into the final quarter of calendar 2016.
This would speak to one very big thing on the agenda about which the Fed has no control (assertions to the contrary by Donald Trump notwithstanding): November’s election. With unemployment below 5% and (slow) domestic growth continuing, there is literally nothing else visible for the Fed to remain wary of.
Speaking of domestic jobs, weekly Initial Jobless Claims were again released this morning, and last week’s very low 260K dropped even further, to 252K for the week. We’re still a couple weeks away from the next U.S. non-farm payroll report, but there appears to be not much in the way of another solid showing in the U.S. labor market from our current perspective.
As a result of all this, market futures are up big 45 minutes prior to the opening bell. The S&P 500 is currently up 9.75 points, the Dow is up 80 and the Nasdaq +23.75. Further, we’re seeing higher oil price reads from the WTI — +2.1% at this hour — and Brent crude — +1.7%.