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Mar 18, 2015

Analysis – Fed taking it slow, giving markets a reason to hit the accelerator

By David Gaffen

(Reuters) – If the opposite of a tantrum is a happy dance, then that’s just what stock and bond markets performed on Wednesday after the Federal Reserve sounded less likely to act aggressively in raising interest rates than investors anticipated.

Although the Fed removed a reference to being “patient” on rates from the statement it issued after its policy meeting, it reduced its forecast for the path of the federal funds rate and economic growth. This drove rallies in both stocks and bonds as investors suggested the economy has a “Goldilocks” quality – not too hot, not too cold.

Mar 18, 2015

Fed taking it slow, giving markets a reason to hit the accelerator

By David Gaffen

(Reuters) – If the opposite of a tantrum is a happy dance, then that’s just what stock and bond markets performed on Wednesday after the Federal Reserve sounded less likely to act aggressively in raising interest rates than investors anticipated.

Although the Fed removed a reference to being “patient” on rates from the statement it issued after its policy meeting, it reduced its forecast for the path of the federal funds rate and economic growth. This drove rallies in both stocks and bonds as investors suggested the economy has a “Goldilocks” quality – not too hot, not too cold.

Mar 18, 2015
via Morning Bid with David Gaffen

Better Fed than Dead

Headed into the Federal Reserve decision this afternoon, there’s been a decided shift in positioning in the fixed-income markets and conviction in terms of investor positioning.

On the latter, Bank of America/Merrill Lynch finds that a growing number of investors see either June or September as prime-time for rate lift-off from the Fed (30 and 38 percent, respectively), whereas in January, “June” was ranked in third place – after September and October – as the most likely point for the Fed to begin raising rates.

Mar 18, 2015
via Morning Bid with David Gaffen

Better Fed than dead

Headed into the Federal Reserve decision this afternoon, there’s been a decided shift in positioning in the fixed-income markets and conviction in terms of investor positioning.

On the latter, Bank of America/Merrill Lynch finds that a growing number of investors see either June or September as prime-time for rate lift-off from the Fed (30 and 38 percent, respectively), whereas in January, “June” was ranked in third place – after September and October – as the most likely point for the Fed to begin raising rates.

Mar 18, 2015

Alibaba shares drop in premarket before lock-up period expiration

NEW YORK (Reuters) – Alibaba Group Holding Inc shares were lower before the opening bell on Wednesday, as a six-month period prohibiting insiders from selling their shares was set to expire, in an event that many thought could expose the Chinese e-commerce giant’s stock to more weakness.

In premarket trading, shares were down 1.3 percent at $83.40. Coming into the day’s action, the stock was down more than 29 percent from its November high.

Mar 17, 2015
via Morning Bid with David Gaffen

Ups and Downs

Monday’s activity in equities was likely the last major bit of volatility that investors will see before the conclusion of the Federal Reserve’s two-day meeting on Wednesday, so we’re entering into a bit of a quieter period for the next day-plus.

That’s not a bad time to look back at the overall ups and downs the market has seen this year. The rally on Monday, predicated supposedly on the falloff in the dollar that cut off strength in the greenback, however temporarily, was the latest in a series of 1 percent moves that pulled the market out of negative territory for the year, even if it was slight.

Mar 17, 2015
via Morning Bid with David Gaffen

Ups and downs

Monday’s activity in equities was likely the last major bit of volatility that investors will see before the conclusion of the Federal Reserve’s two-day meeting on Wednesday, so we’re entering into a bit of a quieter period for the next day-plus.

That’s not a bad time to look back at the overall ups and downs the market has seen this year. The rally on Monday, predicated supposedly on the falloff in the dollar that cut off strength in the greenback, however temporarily, was the latest in a series of 1 percent moves that pulled the market out of negative territory for the year, even if it was slight.

Mar 13, 2015
via Morning Bid with David Gaffen

Doubling down

By this time, it’s safe to say the market is starting to gear up for the Federal Reserve’s meeting on Tuesday and Wednesday next week. It is expecting the Fed to remove the word “patient” from its statement, which will indicate a plan to raise rates by the beginning of the summer.

With that in mind, the market stands at something of an inflection point. It has alternated between weakness and strength in recent days, depending on the whims of the bond market. Rates still appear to be headed higher, which makes stocks look a bit soft.

Mar 12, 2015
via Morning Bid with David Gaffen

When you wish upon a star

The day is filled with a number of events, most of which couldn’t overwhelm the entire market, but remain important in their own right as both sentiment indicators and as signals of where demand is going for particular assets:

–Corporate news, to begin with: The earnings season is over, and we’re not at pre-warnings season yet (thank goodness), but there’s still activity to be aware of. Walt Disney holds its annual meeting of shareholders, where investors will vote on trying to separate the chair/CEO position currently held by Bob Iger. It’s failed in the past, and the chances are slim that it will succeed this time. In the past, some big investors, like CalSTERs, voted in favor of separating the positions, in part because they were concerned that Iger wasn’t doing enough to really drive revenue and growth at Disney. They complained bitterly about it in 2012, but since then, the company’s strong equity performance (in no small part due to share buybacks) has held the day, though it’s questionable in the last two years whether the primary person responsible for the company’s success is Mr. Iger or Queen Elsa of Arundel; plenty would bet on the latter.

Mar 11, 2015
via Morning Bid with David Gaffen

Outpost in Ukraine

The International Monetary Fund will decide later today whether to approve a big package of bailouts for Ukraine – provided the country, struggling with a weak economy, a sharp decline in oil prices and a conflict with Russia, can figure out a way to get about $15 billion from its creditors. Ukraine would have to keep its debt-to-GDP low enough so that the IMF doesn’t feel like it’s sticking its neck out too far.

Ukraine is only one of a few spaces in emerging markets that’s getting hit hard of late. A major index of emerging markets stocks has dropped for nine straight days. The dollar is at a 12-year high against a basket of major currencies. The dollar hit its highest level against the Brazilian real in 11 years and a high not seen against the Mexican peso since at least the late 1980s. Those gains won’t go on in perpetuity – markets go two ways, even the lousy ones. But the move and the fallout for emerging markets is one that investors are going to be dealing with for some time. The low interest rates in the United States that have buoyed borrowing in both the corporate and EM sectors for years are being shaken by anticipation of the Fed’s raising interest rates as early as this summer. The dollar’s gains increase the costs of our imports.

    • About David

      "David Gaffen oversees the U.S. markets team, having joined Reuters in May 2009. He spent four years at the Wall Street Journal, where he was the original writer of the web site's MarketBeat blog. He is a frequent guest on Reuters TV, and has appeared on CNN International, Fox Business, NPR, and assorted other media and is the author of the book "Never Buy Another Stock Again.""
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