Bonds will be the Tell for Stocks Following the Fed Announcement
The focus Wednesday is on the FOMC meeting, which include the statement, the forecasts, and Yellen’s press conference. Since the April meeting, nearly every inflation measure has moved higher. The slightly stronger than expected CPI report for May that was released Tuesday suggests the next (May) core PCE reading likely rose, lifting the y/y rate to 1.6%.
The Fed’s statement and forecasts will likely recognise that its mandates are being approached. However, attempts to model Fed action based on past business cycles may be fundamentally flawed.
The Federal Reserve will likely indicate that additional accommodation is still necessary, even as its policy goals are approached. That it recognizes that its policy goals are being approached will be reflected in its forecasts, where unemployment is likely to be revised lower and inflation higher.
This will offer a stark contrast to the Bank of England. BOE Governor Carney had leaned against calls for an early rate hike in the forward guidance provided until last week and then says the market underestimates the chances of an earlier start in the rate hike cycle. We expect the FOMC to stick to the course, broadly outlined by Bernanke, under which the Fed continues its “measured” tapering of 10 billion per meeting and winding down QE), with the first rate hike likely in H2 15.
The bond markets will be “the tell” for stock investors post the Fed announcement. This will not come until after Janet Yellen completes her press conference. Yields have remained depressed during 2014, despite many calls for the 10-year to move above the 3% threshold as stock prices moved to all-time highs. A move above 2.65% will technically be bullish for yields (bearish for bonds), and could generate concerns for stock investors in the wake of recent inflation gauges.
- Stocks buoyed by strong manufacturing data 1 view
- GBPUSD Weighed Down By Increasing UK Deficit 1 view
- EPIX Documentary Investigates the Arrest of Ross Ulbricht, the Alleged “Dread Pirate Roberts” — Founder of Online Black Market Silk Road, in the Original Documentary “Deep Web” 1 view
- Canada Wholesale Sales Sharply Higher 1 view
- Stocks close on their lows, Blackberry disappoints 1 view
- Detroit Bankruptcy Draws Visitors to the City’s Ruins: LA Times 1 view
- Stock Tread Water Ahead of Fed Meeting 1 view
- Financials on the Ropes; XLF Underperforms 1 view
- FOREX Watch: Euro edges higher ahead of ECB 1 view
- Blackberry Foxconn Partnership 1 view
|Forex Broker Spreads »|
|Most Popular Articles »|
- US Dollar Index Higher as Greenback Climbs Versus Euro 1 view
- Canadian Economy Sheds 28,900 jobs in April 1 view
- US Dollar Still Vulnerable to Durable Goods 1 view
- Domestic demand drives German growth in Q3 1 view
- Dollar Steady Ahead of Housing Starts and Confidence 1 view
- Harman to Collaborate with Pono and Neil Young to Bring Pono HD Music into the Car 1 view
- American Express Soars on Q3 Results 1 view
- Yen Gains Traction Following Weak Chinese PMI; Traders Eye Services PMI 1 view
- Western Union Offers Apple PayTM as New Pay-In Option for Money Transfer Customers 1 view
- Eurozone Labour Costs Fall 1 view