FRB Chair Yellen’s remarks were of little impact. However after Yellen spoke, the Vice Chair Fischer stated Yellen’s comments leave open the possibility of an interest rate hike in September, further stating her remarks are actually consistent with the possibility of two hikes this year. Wow! Talk about potential miss messaging or do these conflicting messages actually reflect today’s environment where no one rally has a clue of what might occur tomorrow?
As noted many times, the markets have become spoon fed by the Federal Reserve, believing that this august body is both omnipotent and omniscient. Unfortunately for all the perceived sophisticated forecasting tools, the Fed’s forecasts are no more accurate than their private sector brethren. Can I cynically suggest both the private and public sector attempt to validate each other’s views?
All want to know the future but unfortunately unless you meet Dr. Brown in his DeLorean, no one can accurately foretell tomorrow’s events. Markets are people and people move markets, market movements based upon people’s emotions and the interpretations of such.
Friday the all-inclusive unemployment report is released. Some think this report will be the deciding factor as to whether there is an increase in September. I think Yellen et.al. has the preliminary findings of August’s survey and is perhaps a basis for the comments made by both.
As inferred above, equities were not overly responsive to Yellen’s remarks, perhaps rising an additional 25 points as she commenced speaking. Equities then reversed direction on Fischer’s comments ending about 50 points lower.
As noted many times the markets are now entirely co-opted by algorithmic or technology based trading and insinuation of higher rates, equities will be met with selling.
What will happen this week? The economic calendar is crowded with various employment surveys, manufacturing indices and confidence reports.
Last night the foreign markets were mixed. London was up 0.31%, Paris down 0.83% and Frankfurt up 0.64%. China was up 0.20%, Japan up 2.30% and Hang Sang down 0.38%.
The Dow should open flat with the averages heading for their first monthly decline since February with all waiting for more economic data to assess the timing of Federal Reserve rate increases. The 10-year is up 4/32 to yield 1.62%.