Friends
There seems to be some confusion in the markets since the release of yesterday’s Fed statement. The first reaction in bonds was for prices to move lower while yields moved higher – interpretation being that inflation is going to continue to be hot and interest rates will have to move higher. But today, less than 24 hours later, bonds rallied and bond yields fell. Stocks are also sending mixed signals. If inflation is the problem then financials, industrials and value stocks in general should be moving higher. But just the opposite is unfolding as we have seen the Nasdaq actually move higher while the value laden Dow Jones Industrial Average sold off yesterday afternoon and today. Is the Fed on top of things? Is the Fed behind the curve with regards to monetary policy and inflation? The dot plots indicate that rate hikes are possible by the middle of 2023. If they need to happen before that what would that signal? If the Fed has to raise rates sooner than later might that indicate that the economy is remaining hot? Isn’t that a good thing for companies, thus stocks? Again, the market reactions appear to be indicating that there is a lot of confusion.
As for today’s action, by the close the Dow Jones Industrial Average was down 210 points to finish the day at 33,823. The S&P 500 was down 1 point to close at 4,221. The Nasdaq Composite Index was up 121 points to close at 14,161. Gold was down $87 to trade at $1,773 per ounce (why is gold falling if inflation is hot?), while oil was down $1.10 to trade at $71.05 per barrel WTI.
If all the above is a little confusing, that’s ok. I’m a little confused too. Let’s see how the week finishes out tomorrow.
Have a nice evening everyone.
