- Fed's Harker says fed action on inflation is required
- US stocks slide into the close
- Fed announces their planned $40B QE purchases from January 14 to February 11
- For what it's worth, Fed's Clarida says inflation will prove to be transitory
- Fed's Evans is 3 bid/4 offer for Fed tightenings in 2022
- WTI crude oil futures settle at eight $82.12
- SC blocks Biden vaccine mandate for businesses
- Don't Look East
- Fed's Evans: Demand for goods has exploded while services is woefully below where it was
- U.S. Treasury auctioned off $22 billion of 30 year bonds at a high yield of 2.075%
- Fed's Barkin: Labor force participation is stagnant and we may need to accept that
- European indices close mixed with some indices up and some down
- Fed's Brainard: We are going to use our tools to bring inflation down over time
- Pres. Biden update on Covid: Frustrated by hospitalizations from omicron
- Bitcoin makes a quick move lower
- US December PPI 9.7% y/y vs 9.8% expected
- US initial jobless claims 230K versus 200K estimate
- Fed's Harker: Expect 2022 GDP growth to be in 3-4% range
- The NZD is the strongest and the USD is the weakest as NA traders enter for the day
The US stocks closed near lows for the day but the move lower was not led by a run higher in yields. In fact, the 10 year yield is trading just below the 1.700% level after trading at 1.808% earlier this week. The interest rate sensitive NASDAQ index down the most with a decline of -381.57 points or -2.51%.
Meanwhile over in the forex market, the USD fell again today perhaps in reaction to the decline in yields. So there is some disconnect with the interest rate market, the forex market and the stock market , from the recent relationships.
How does it play out going forward?
One of the catalyst of the decline today seemed to be analysts feelings of the stock market during the CNBC halftime report program (in particular Josh Brown and Pete Najarian). All the analysts seemed to jump on the bearish bandwagon (or so it seemed). It may have been a coincidence, but the market started to pick up steam to the downside during their more bearish comments.
Also helping the downside in the equities (in particular the NASDAQ index), was the inability to stay above it's 100 day moving average yesterday, and its inability to get above its 100 day moving average today. That moving average comes in at 15278.31. The high price in the NASDAQ index today reach 15259.71. Yesterday the high price reached 15319.03.
That failure has push the index back down toward its 200 day moving average at 14719.42. Recall from Monday's trading, the price did move below the 200 day moving average for the first time since all the way back to April 2020. Speculation is that a another move below the 200 day moving average would trigger more anxiety and selling.
Meanwhile in the debt market, for the second day in a row, the market was able to absorb higher inflation data. The US CPI rose to 7% yesterday, and yields moved lower. Today the PPI data came in at 9.7% YoY. Although that was a tick later than the 9.8% expected, it still is 9.7%. Yields nevertheless move lower and seemed to be anticipating that inflation will come off/the economy will slow/yield curve might turn flatter.
Honestly everything is possible. The reactions in the market are sort of pointing in that direction. I don't know if it will be a good thing or bad thing, but it a likely just be a volatile thing. Time will tell.
In the forex market, the JPY was the strongest of the majors followed by the CHF (safe haven currencies). On the weak side is the CAD and the AUD. The US dollar was the weakest of the major currencies but did come off it's lows by the close. Nevertheless it still was lower verse all the major currencies with the exception of small gains verse the CAD and AUD.
Looking at some of the individual currencies,
- EURUSD: The EURUSD move to the highest level since November 11, reaching 1.1481 before rotating back down to 1.14524 near the close. Recall from yesterday, the price moved outside of the non-trending up and down range above 1.1385. The near 100 point increase since the break is okay, but not exactly a runaway. The falling 100 day moving average currently at 1.1505 remains a topside target going forward. Of that level can be broken, it could ignite further upside buying
- USDJPY: The USDJPY continued its fall to the downside but stalled right near support at the 113.95 to 114.00 area (see post here). Moving below that level would take the price back within a swing area that kept the pair more or less confined from near the end of November through near the end of December.
- GBPUSD: The GBPUSD also moved higher today and traded above the 200 day moving average for the first time since September 16 at 1.3733. The price also moved above the 50% retracement of the move down from the June 2021 high at 1.3704. The high price reached 1.37479 before rotating. The current price trades at 1.3713. In the new trading day moving below the 50% midpoint at 1.3704 would give sellers more cause for pause..
In other markets as the US session ends, the snapshot shows
- Spot gold is trading down four dollars on the day.
- Bitcoin is trading down at $42,831
- Crude oil is down around one dollar or -1.2% at $81.65