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The common thoughts coming into today? The Fed / taper will not surprise, as the Fed mouthpieces, including the WSJ’s Jon Hilsenrath, have laid out the boundaries quite well over the past few weeks, leading many to believe the Fed’s message was clear – taper lite. The guidance, the plan going forward, would be the key. Hilsenrath: Their updated economic projections could show an economy that appears back to normal by 2016, but their projections of where short-term interest rates will be could show rates still quite low by then. Their challenge: how to justify the low interest-rate plan when their own estimates suggest an economy regaining its health.
Today started with 248k ESZ traded on Globex, ESZ trading range was 1697.25 – 1701.75. Tuesday’s regular trading hours (RTH’s), SPZ pit session trading range was 1698.70 – 1692.20 before settling at 1698.30, up 7.1 handles. In Asia 6 out of 10 markets quoted closed lower: Shanghai Comp +0.29%, Hang Seng -0.27%, Nikkei +1.35%). In Europe 9 out of 12 markets were trading higher (DAX +0.43%, FTSE +0.16%).
Roger_Volz (05:34) Some GBP strength seen post Sep minutes from the BoE as the MPC were unanimous and no one saw the need for more stimulus at present / [JEF] bond debacle / Nikkei +1.3% leading globals / ITALY CONSIDERING DELAYING TARGET OF ACHIEVING BALANCED BUDGET IN STRUCTURAL TERMS UNTIL 2014 – GOVT SOURCE … EU cans being kicked, getting ready to come off back burner? / FedEx +1.6% no harm to bulls – [FDX] beats by $0.03, beats on revenues – quarterly profit up 7% / 6e D OB > 1.6080 to get first extreme from 9/12 (OS < 1.4835 channel bottom test). August housing starts 891k vs 917k expected / Today’s U.S. housing reports checked in a little light, but there was strength in single units vs the multi-family homes.
Today’s December S&P 500 (SPZ) pit session opened unchanged at 1697.50 – 1698.50, traded an early low of 1697 before trading 1699 at 9:10. The equities were fractionally lower on the initial move and the volume was light ahead of FOMC decision. The [DJIA] held 15,503, off 26 points on the first test as the sideways grind set in. There was positive chatter regarding FDX earnings as the stock traded $115, $7 from its all-time high made in March 2007. However, the SPZ extended the morning low, trading 1693.50 before grinding back up to 1696 area by 1:00 and the FOMC decision.
SURPRISE!!! QE to infinity! No taper – no change in guidance. Fed keeps monthly buying at $85 billion intact – the Fed wants “more evidence” of growth progress before tapering. Rates will stay very low for considerable time after bond buying ends. Albie_S (13:59) breathing optimism into the American recovery. Bernanke Style http://bit.ly/15Dg1jk
S&P 500, [DJIA] and the [DJT] extend their all-time record highs following the Fed headlines as the bears scramble – capitulation is in the air! With $100bil pulled out of bond funds, that money has to go somewhere…[GOOG] hits $900 again and [PCLN] hits 1000 BUCKS PER SHARE… By 2:10 the SPZ traded a new all-time record high of 1722.80 along with 20% of S&P 500 stocks hitting new 52-week highs – most since 8/1. or is this a blow off top near term? REALLY? Roger_S (14:16) ES low of the day is in. LOL! Oh, during all the excitement I almost forgot to post, the Fed also cut 2014 GDP forecast.
The early look on the closing imbalance showed (14:13) MiM – MrTopStep Imbalance Meter showing 50/50%, as the NYSE was approaching 450M in volume, well ahead of yesterday’s volume. At 2:45 the SPZ was trading 1718.50 area when the closing imbalance showed a small imbalance to the buy side. The cash close traded 1718.30 area before settling at 1717.80, up 19.5 handles on the 3:15 futures close. The S&P is up over 6% in the last 9 trading days.
The following was originally posted on 9/6 post the jobs data – overall these show almost no change to prior expectations.
CS – Sept taper, -$10b MBS and -$10b Tsys or Opt2 of -$10b Tsys, -$5b MBS
Moodys – Sept taper of -$10b Tsys
MS – Sept taper of modest amount w/explanatory language
TD – taper is on; BMO- Sept 18 taper if next data don’t disappoint
RBS – Sept taper of -$10b Tsys and -$10b MBS, cld be trimmed if ylds rise
SG – small Sept taper; Wrightson- Sept taper is on
HFE – Sept taper is on; Jefferies- Oct taper more logical
BAML – “more likely to wait (to Dec) but it remains game-day decision.”
FannieMae – Sept taper likely; FTN- Sept taper, did not say size
Goldman – Sept taper, perhaps a dovish taper
RBC – Sept taper
Nomura – SepT taper
[GS] Goldman’s Hatzius: “While the August employment report was a moderate disappointment, we believe it is probably not weak enough to prevent the FOMC from tapering in September. However, it does raise the likelihood of a “dovish taper,” which could include a small size of the overall adjustment to purchases, and which we think would likely coincide with an enhancement of the forward guidance.
And here’s….this morning’s update At-a-Glance: Your Fed Expectations Cheat Sheet – The day has finally arrived, with the U.S. Federal Reserve concluding its much-awaited September policy meeting later Wednesday. Markets have pinpointed for some time this meeting as being when the U.S. central bank announces its decision to start winding down its $85 billion-a-month asset-purchasing program. http://on.wsj.com/1aSRvPF
But who would have thought part 1) Did someone say something about a retest of the contract high? Shot last Thursday at 10:00CT: Brian Shepard and Jill Malandrino @TheStreet http://bit.ly/186FaiE Also, posted last Friday: Jason Carter (10:16) bull flag 120 min vs right shoulders forming. buying vol may be the way to go. See Sept vol bid into FOMC. elway (10:46) hard to sell a quiet tape with positive breadth on the friday before expiration. The breadth has remained positive since…
But who would have thought part 2) We have been posting the stats lean to the upside through the roll and the quarterly rebalance. It will be interesting how this week plays out – following the gains over the last 45 days. Coming into today, the S&P 500 has been up 9 of the 11 trading sessions in September and this month alone the December contract has rallied from the Friday, Aug. 30, settlement of 1624.60 to Monday morning, 9/16 new all-time high of 1700.00 just days in front of the FOMC decision.