The Minutes from the April FOMC meeting were a non-event. The Minutes stated that an interest rate hike in June is unlikely even though the Committee believes the first quarter slowdown is unlikely to persist.
A comment I found interesting is that the FOMC is “surprised” consumers were not spending the windfall from lower gasoline prices, concluding there may be “other mitigating factors restraining such spending.” The Committee elaborated further “expressing particular concern about this prospect” because their forecast for a moderate expansion is dependent upon household spending growing “robustly.”
Another point of considerable interest is concern about market volatility brought about by new technology, the result of the increased role of high frequency traders, decreased inventories of bonds held by broker dealers and “elevated assets of bond funds” which have little liquidity.
Continuing further, the Committee fears bond yields “could rise sharply” when monetary policy is changed which I believe could then have a considerable impact on equity values.
Tomorrow FRB Chair Yellen is speaking. Will she make any monetary comments?
Changing topics, earlier this week I wrote about the unemployment rate and weekly jobless claims, commenting about the 37 year low of the LPR and the potential number of workers who have exited the workforce therefor these workers do not exist.
CNBC quantified this view yesterday when it reported that 40% of the unemployed have stopped looking for work. Fifty five percent of this group has been unemployed for more than two years thus suggesting any type of benefits have been exhausted. Wow!
What will today’s weekly jobless claims suggest? On the surface, continued strength in the jobs market? But is this strength bonafide? Perhaps this lack of strength is a reason why consumer spending did not accelerate as most, including me, thought it would with the collapse of gasoline prices.
Last night the foreign markets were London was Paris and Frankfurt. Japan was and Hang Sang
The Dow should open quiet. Will this be the fifth day in a row of a quiet market? Such tranquility typically suggests one of two things…a large upside move or downside move. Unfortunately only history will answer what direction. The 10-year is up 5/32 to yield 2.23%.