While no one expected movement out of the Federal Reserve, there is still usually some extra volatility post statement but it was quite limited today. The S&P 500 fell 0.12% while Apple’s (AAPL) jump helped lift the NASDAQ to a 0.58% gain – Apple is a massive component in the index. The Fed continues to be in “Goldilocks” mode – sanguine on the economy but certainly not enough to raise rates. And with the election coming up they won’t do it until December if at all this year; a far cry from the “4 rate hikes!” everyone was yelling as we entered 2016. (We were not yelling that).
As expected, the Federal Reserve kept interest rates unchanged in its statement released in the afternoon. Policymakers noted the labor market has “strengthened” and that “near-term risks to the economic outlook have diminished.” “I didn’t get the feeling it was dovish or hawkish. It was kind of neutral, really,” said John Caruso, senior market strategist at RJO Futures. “It seemed like they upgraded the economy but they didn’t say they were ready to move forward on raising interest rates.” According to CME Group’s FedWatch tool, the market sees an 18% probability of a September rate hike, compared with a 30% probability before the statement.
The Bank of Japan is set to begin a two-day meeting on Thursday. Overnight, Japanese Prime Minister Shinzo Abe said his government would compile a stimulus package of more than $265 billion to reflate the flagging economy. So this is about year 20 of the government and central bank of Japan trying to stimulate the economy. It’s starting to sound familiar – we are on year 8.Continue reading