How The Fed Could Spook Markets, Bank Stocks Today
May 25, 2017, 02:02
Markets desire clarity on whether the Fed intends to raise interest rates at any of the next few meetings. Goldman Sachs sees the announcement of balance sheet adjustment as "a smaller tightening step" than the Fed's typical 25-basis-point rate hike, Goldman's chief US economist, Jan Hatzius, explained recently.
"Our US economists expect the minutes to come down on the hawkish side and continue to expect the Fed to hike in June and September and announce balance sheet reduction in December", Citi analysts wrote today. Since the onset of the Great Recession in 2008, the Federal Reserve deviated from rules for determining interest rates to pursue an "accommodative monetary policy", Fischer explained. The central bank lifted rates at its meeting in March, but then voted unanimously in May to leave its target interest rate unchanged at a range of 0.75 percent to 1 percent. Talk of a cap limit for the amount of securities the central bank would allow to roll off helped diminish volatility as investors welcomed clarity on how the Fed would go about tapering its holdings.
The big question is whether the Fed is getting ready to pull the trigger on a change in its policy of reinvesting the principal on its $4.5 trillion mortgage and Treasury bond holdings as the bonds mature. Now investors will likely look to economic data released during the next three weeks for clues as to whether the Fed will raise rates when it meets June 13-14.
The Dow climbed 74.51 points or 0.4 percent to 21,012.42, the Nasdaq advanced 24.31 points or 0.4 percent to 6,163.02 and the S&P 500 rose 5.97 points or 0.3 percent to 2,404.39.
US gold futures shed 0.3 percent to $1,251.2 an ounce.
The Federal Reserve will nearly certainly take steps to start reducing its $4.5 trillion balance sheet later this year.
The retail sector issued more results that disappointed.
The S&P increased two points to hit 2,401 - a new record.
The gradual approach is expected to prevent any surprises in the markets, according to experts. Some noted that since the Fed met early this month, the government reported that unemployment in April fell to a decade low of 4.4 percent, with a healthy 211,000 jobs added.
"Any combination of the above is most likely bullish for the USA dollar, especially as post a June hike, the market has not priced this possibility in on its forward indicators".
"My expectations are that the pace of interest rate hikes will be kept steady and stable regardless of the short-term fluctuations in the U.S. economic data", said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
Moody's Investors Services on Wednesday downgraded China's long-term local and foreign currency issuer ratings by one notch to A1 from Aa3, citing expectations that the financial strength of the world's second-biggest economy would erode in the coming years.
The more one looks at the bill, the more one sees it "succeeds" in only one regard - giving big tax cuts to the very rich. The CBO also found that an amendment in the House bill would over time block some unhealthy people from buying insurance.
The scheme requires compliance with 27 global conventions, which include a commitment to never reinstate the death penalty. But Economic Planning Secretary Ernesto Pernia said the decision to cut aid from Europe may still change.
But a senior North Korean diplomat has said Pyongyang is open to talks with Washington under the right conditions . Trump and Moon have both also warned that a major conflict with the North is possible.
Only men are allowed to become emperor under current law, though Japan has been ruled by empresses in past centuries. Princess Mako's brother, 10-year-old Hisahito, is the fourth heir to the throne and the only boy in his generation.
Signage in the area has since gone up, suggesting that disturbing marine wildlife could carry up to a $100,000 fine. The Steveston Harbour Authority put up signs that read "please do not feed the sea lions" after the incident.
The Statesville Record & Landmark reports at least two mobile homes have been destroyed in a portion of Iredell County near U.S. A cold front will approach the area this afternoon, triggering a line of showers and thunderstorms that may be severe.
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