It’s hard to know what to make of Wednesday.
We got a lackluster CPI print and folks seem to be concerned about the dissents in the Fed hike. Between those two things and renewed uncertainty around the political outlook following the surprise result of last night’s special election in Alabama, the dollar decisively snapped its best win streak of the year.
If you look at S&P futs, you can see the Jones effect (i.e. drop on the potential for more gridlock on the Hill), the “bad news is good news” effect from the CPI miss, and then the confusion around the Fed:
Another record close for the Dow – this is the fifth consecutive winning session, the best streak since… ummm… two weeks ago:
Best day for gold in three weeks as the dissents on the Fed decision and the weak CPI conspired to give bulls some welcome respite:
The curve bull steepened on what looked like folks unwinding flatteners following the Fed. Have a look at 5Y yields on the day:
Yellen had some fun things to say at her final presser as Chair. “I would not say that we are out of ammunition,” she replied when asked if, well, when asked if the Fed was out of ammunition. “We haven’t seriously thought about using negative rates,” she added, noting that NIRP is “not something we’ve studied inside the Fed in any considerable extent.”
As far as equities go, Yellen wants you to know that just because stock prices are “elevated” doesn’t mean they’re overvalued. Actually, that’s almost exactly what that means, but you know, fuck it, right? It’s her last presser so give her a break.
As far as taxes go, it looks like there’s a deal. Trump is super excited. “I promised we would pass a massive tax cut for the everyday, working Americans who are the backbone and heartbeat of our country,” he said in prepared remarks at the White House. “We are just days away from keeping that promise and delivering a truly amazing victory for American families.”
Again, that is an outright lie. Characterizing this as a gift for “everyday, working Americans” is wildly misleading. And we’re not just saying that because Trump’s a moron. The numbers are in on this and it disproportionately benefits corporations and the wealthy (including Trump and his family), it will in all likelihood not pay for itself, and everyone knows trickle down doesn’t work anyway. So there’s that.
Meanwhile, in the cryptosphere, it’s worth noting that the arb disappeared this afternoon amid a pretty steep slide in futures:
As noted earlier, Bitcoin futs are off to a quicker start than VIX futs got off to in 2004:
Crude did not catch a break from the slumping dollar as oil declined for a second day. Similar story here with the EIA data. Larger-than-expected draw in crude inventories (fourth in a row) seemingly offset by a fifth build in gasoline stocks. Again, it’s been a rough couple of sessions:
We’ll leave you on an upbeat note this afternoon. Here is Yellen almost literally kissing you goodnight and wishing you sweet dreams on her way out the door:
We are in a synchronized expansion with growth around the world.
There is less to lose sleep about now than in quite some time.
Let’s hope Wednesday’s Janet Yellen doesn’t tell that to Janet Yellen from two weeks ago…