Negative Fed minutes quickly reverse Wednesday stock market gains
WASHINGTON – In its latest Open Market Committee minutes Wednesday, the Federal Reserve put a negative spin on the economy. The nation’s central bank fears that the continuing coronavirus reaction will, in turn, continue to affect the US economy in a negative fashion. Coming in at 2 p.m. ET Wednesday, today’s rather negative Fed minutes, followed by remarks by Fed Chair Jerome Powell, quickly extinguished a modest morning rally on Wall Street.
Amazon down but Apple up
As of 3:45 p.m. ET, all three major averages are down fractionally, with the tech-heavy NASDAQ currently off the most. It’s down 40-45 points (0.36%), although that scarcely dampens Tuesday’s rally in tech, which had Amazon.com’s (trading symbol: AMZN) shares up well over $100 a share at one point. The shares are giving $45 of that gain back as we write this column. But that scarcely erases Tuesday’s wild gains.
Apple shares (AAPL), however, are still slightly up on the day, although the stock is off its earlier high. The company continues to experience surprisingly positive results despite the ongoing coronavirus issue, which is beginning to resemble a serious overreaction to the situation, as reported “cases” now hardly track at all with the resulting number of deaths. That’s the stat that the media should be following. Except that they don’t, because that might help out President Trump in the November elections.
Are we still in a V-shaped recovery?
Nonetheless, despite today’s negative Fed minutes, Mr Market continues to believe we’re already deep within a fiery V-shaped recovery. It still remains in place, this afternoon’s moderate reversal notwithstanding.
Back to those negative Fed minutes
CNBC provides a good synopsis of the Fed’s current concerns.
“Officials at the meeting ‘agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term,’ the meeting summary stated.
“As Chairman Jerome Powell and Fed leaders have emphasized multiple times, the minutes noted a consensus on the need for more fiscal help from Congress, which recessed without a deal for more rescue funding even as critical elements such as enhanced unemployment insurance remain expired.
“The minutes ‘underscored the need for a fiscal package,’ said Quincy Krosby, chief market strategist at Prudential Financial. ‘Chairman Powell has been adamant that we need to see another package, especially because they see the negative effects of the slowdown.’”
Oops. The Fed wants Congress to complete its legislative work. Under Pelosi?
Problematically, the Fed may not get the “fiscal package” they need from this Congress. House Speaker Nancy Pelosi has called the recessed House back into session next week to grill the current Postmaster General on President Trump’s alleged evil plan to destroy the USPS sorting system and take away all its outside mailboxes nationwide to thwart her party’s certain victory this fall. Russia will probably enter into next week’s propaganda fest. Oh, wait. It already has.
It’s all a Trump-Russia Conspiracy! Vote Biden!!
Behind the scenes, of course, Pelosi will continue to press for her extortionate, non-crisis budget demands, all of which are geared toward keeping impecunious blue states afloat while gutting a major element of the Trump-GOP tax package – namely the cap on mortgage interest deductions that provided major taxpayer underwriting for tax-and-spend Blue State legislation.
In the past, the GOP always caved to this extortion. They may not be open to doing so this time, however. In that case, Pelosi will likely refuse to pass a new round of coronavirus relief legislation. As with immigration, the Democrats prefer to let crucial issues ride, giving them another election issue to scream about. Most of what this party allegedly wants might have been passed years ago. But why give up a perfectly great issue by actually solving it?
The Powell Posse may actually understand this. And that may be why they tried to signal Congress to get off it’s collective duff with today’s clearly negative Fed minutes. That said, previous Fed chairs tried this with other Congressional sessions. But Congress rarely responded, clearly preferring to allow political issue to fester, particularly in election years.
Mr Market may consider further Congressional relief action irrelevant
What’s interesting is that Mr Market continues to steam modestly ahead in spite of it all. (Except for today, of course.) That seems to indicate that markets may not actually care whether Congress passes any more relief bills at all. They may consider that President Trump’s current executive actions supporting workers might be sufficient.
In addition, we need to at least consider the possibility that, asinine Blue State house-arrest regimes notwithstanding, big chunks of the nation’s economy seem to be in robust recovery mode. That defies pessimistic expectations stoked by a rabidly anti-Trump media. Facts are one thing. Propaganda puffing is another.
If this is the case, the media may find itself approaching Election 2020 with a heaping helping of egg on its collective face. It wouldn’t be the first time.
Meanwhile, we remain heavily invested in stocks and some bonds, but with fingers crossed. You never know these days. Either Mr Market is way, way ahead of himself. Or else he’s prophesying the greatest bull eruption in history. We’ll likely find out the answer fairly soon.
Those negative Fed minutes Wednesday sealed Mr Market’s fate this afternoon. Closing numbers for Wednesday: The Dow closed down 73.24 points for a 0.26% loss on the day. The broader-based S&P 500 closed down 64.38 points for a 0.57% loss. And the tech-heavy NASDAQ closed down 14.83 points, losing 0.44% on the day. In other words, stocks closed flat, with a moderate negative bias. Let’s see what tomorrow brings.
– Headline image: Cartoon by Branco. Reproduced with permission and by arrangement with Legal Insurrection.
Modifed to fit CDN format.