Fed Actions In 2004 (“Patience”)

On the heels of yesterday's market panic over an expected and quite dreaded interest rate hike announcement next week, I hereby submit Barry Ritholtz's very concise take on this topic.  It's really just one sentence.  When the Fed says it intends to take a "patient" approach to interest rates, you can take this to the bank because they did the same thing in 2004 (and several times before and several times since.)  I mentioned that, based on prior Fed statements which have been quite consistent, I did not believe there would be a rate hike announcement next Wednesday but that most investors did not share this opinion.  So I was somewhat gratified this morning to read Mr. Ritholtz's column and find that there was at least one other voice out there that did.  The following graphic quite convincingly demonstrates that we will both likely be vindicated next Wednesday.

Art Cashin: Fed Actions In 2004 (“Patience”) | The Big Picture

Dollar powers to fresh highs; stocks and oil fall

The party lasted just one day.  The dollar has already gone back up with a new report today showing inflation near zero, once again portending a very healthy recovery and bad news for those fearing an interest rate hike announcement from the Fed next week.  The strengthening dollar is not only bad news for U.S. companies doing business in international markets (thus threatening their profits), but also caused oil to plummet again, today falling 4.4% with crude now back to $45/barrel.  Investors are pretty convinced at this point that the Fed next Wednesday will announce a June interest hike, whereas the hopes have been that it would come much later in the year.  This anticipation has caused so many jitters that the inflation report caused a 300 point crash in the Dow by mid-day, though it did recover half of that loss by the end of the session to close 145 points down.  Obviously, if this announcement does not happen, if indeed the Fed sticks to its oft stated position that there will be no interest rate hike until the underemployment picture has substantially improved, then the market will be soaring again mid next week.  Though I don't think the rates will be increased next week, I personally hope they are since we have been burdened with this very jittery market for way too long.   The recovery is coming along nicely.  It is time for the Fed to allow interest rates to go up again.  It is the only way to prove that the recovery WILL continue and that the market WILL adapt without the dire consequences so many fear.  My personal opinion is that this is the only way to end these wild day-by-day swings and, once these swings end, the recovery will pick up even more steam.  But that's just my opinion.  With 6.8 billion shares traded today, it's obvious most investors do not share my opinion.  So I will leave everyone on this Friday the 13th with one important question:  If we lost 300 points during the day and then recovered fully half of that by 4 p.m., is this really investor fears of the Fed or is it actually just old fashioned profit taking?

Wall St. bounces back in broad rally; bank shares gain

I have written frequently of late of how the current market often takes good news as bad.  Today the opposite happened - bad news was taken as good and it sent the Dow soaring 260 points, recouping the recent pullback and once again putting both the Dow and S&P back in positive territory for the year.  The impetus this time was a poor February retail report. This was all it took to weaken the dollar against the euro for the first time in 12 years.  As the weakened dollar was taken as a hope that the Fed might not raise interest rates so soon after all, investors were jubilant even though a bad retail report would ordinarily be cause for worry rather than celebration.  Why this report came as a surprise is anyone's guess since all other February sector sales have already come in weak due to the harsh winter, just as it did last year.  But a surprise it was and much to the delight of Wall Street.  Volume was solid at 6.5 billion shares.

Wall St. falls on rate concerns; Citi up after the bell

At one point during today's trading, there was enough good news, or at least the sentiment that it was a good time to buy in on a low, that the Dow was up over 100 points, only to then plummet again on continuing fears of a possible interest rate hike announcement from the Fed next week which many investors fear will kill this long-standing historic bull market, even though the Fed has been very clear that it intends to be very careful to be slow and gradual in its actions so as to avoid that very outcome.  In the end, the market lost all the earlier gains plus an additional 27 points to boot.  The strengthening dollar (also rooted in the prevailing low interest rates) also added to concerns.  Ordinarily a strong dollar would be good news but, again, we are in irrational times where good news is often taken as bad news since, in this new era of global economies, though a strong dollar is very good for domestic health, it is a bane for the many U.S. companies doing their business overseas.  Volume was quite respectable at 6.6 billion.

S&P 500 posts worst day in two months on rate worries

Panic strikes the market again, the Dow plunging a whopping 333 points wiping out all the gains for the year. Once again the culprit is investor fears of what might happen at the Fed next week regarding interest rate hikes in the aftermath of the really strong February jobs report.  Of course most experts expect this to be quite temporary.  And today's pullback may very well prove to be a good thing if the Fed really does take the feared action next Tuesday.  But if instead it continues to do what it's been doing all along. which is almost certainly what it will do, then some smart people are going to be making a lot of money buying in on the low. Volume was above average at 7 billion.

Wall St. rebounds on deal activity; Apple up after watch news

After Friday's panic over the great jobs report, today rational decision making finally took the front seat with the Dow gaining 139 points on increased merger activity.  I got a bit of chuckle from today's expert opining that the market's Monday snapback was due to "reversion to the mean" trading, especially in light of Ritholtz's recent column refuting this and other similar strategies.  But it doesn't take much of an expert to figure out that when the market plummets for irrational reasons, a not too distant snapback for rational reasons is inevitable.  Volume was fair at 6.2 billion.

Succinct Summations of Week’s Events (3.6.15) (+ fun if irrelevant bonus)

It's that time of week again.  And this Sunday I am providing a different kind of bonus.  I'm not really a drinker at all; I might have one or two glasses of wine each year.  The same with coffee.  But I've always been fascinated with wine, especially when I read about people being willing to spend several hundred dollars for a single bottle (and swearing it really is ten times better than a $30 bottle) and even occasionally reading about some outrageous vintage in Europe that sells for hundreds of thousands per bottle (that's not a typo - a bottle, not a case!  Speak of redefining conspicuous consumption!)  I mean how can anyone in good conscience spend as much on a bottle of wine that will be gone in an hour as they would on a (really nice) house?  I've already had a 30 year career as a Main Street corporate manager and now as I prepare to enter a new career as a manager on Wall Street, I am reminded of the oft-used expression "wining and dining clients," a phrase that is not at all metaphorical.  So if an important part of procuring clients is knowing your high class wines and dines, then the graphic that Barry Ritholtz published on his blog on Friday is a must study.  If we've been getting a nice benefit from these weekly eye-shots on the market, I thought it would be fun to take a look at this one-page tutorial on everything (kind of sort of) that you need to know about wine, even if it is only very tangentially relevant to our interests here.  Bon vivant!