WASHINGTON – I held off writing today’s column until the Fed released their eagerly (?) awaited announcement on US interest rates Wednesday afternoon. Waiting was a good idea, too. Itchy trigger fingers caused instant trouble for Mr Market this morning when troubling news reports from South America started hitting the wires. Headlines screamed that the US-China trade meeting between President Trump and China’s President Xi – scheduled to take place in Santiago, Chile on November 16-17 during a scheduled APEC (Asia-Pacific Economic Cooperation) summit – was called off.
ZeroHedge takes it from there. With a chart illustrating the resulting fun.
“US equity market algos panicked briefly this morning, dumping stocks instantly after headlines reported that Chile was canceling the APEC Summit (at which Trump and Xi were supposed to meet and sign a trade ‘deal’).
“The market instantly rebounded as we suspect humans realized that this will just be moved and ‘hope’ remains for a trade deal – no matter how many times you’re disappointed.”
Chalk another false alarm off and send it to the “Oh, well…” Dept.
In fact, Chile canceled the big meeting themselves. Why? If you were lucky and if your favorite cable news channel managed to punch through its 24/7 coverage of the fake Schiff-for-brains, super-double-secret, SCIF-centric Trump impeachment Star Chamber “hearings” and report a bit of actual news, you’d have learned that Chile is still in the middle of mass economic and political demonstrations. À la France’s “yellow vest” demonstrations earlier this year.
With no end to that action in sight, the Chilean government rightly feared possible danger to the APEC conferees next month. And so, out of prudence, they pulled the plug on the APEC meeting rather than risk having some world leader clobbered by rowdy demonstrators in Santiago.
No doubt, the APEC meeting will pick up stakes and happen somewhere else. And reasonably close to the previously scheduled dates, too, I would guess. After all, aside from the usual security concerns for a big international powwow, local hotels and restaurants make the big bucks when shows like this take place in their city, and who wouldn’t want that? And the tax revenue that’s likely attached?
At any rate, the cancellation had nothing to do with the personal Trump-Xi trade semi-deal confab. Or US interest rates.
Unless someone really screws up, the Trump-Xi get-together should still happen before the end of the year. Assuming the mad-dog House
Democrats Stalinists don’t manage to lynch Trump before then. (Ooops. Should I have used that word?)
The market begins to freak out. Oh… wait!
But that logical reason for the Trump-Xi meeting cancellation didn’t prevent a brief, intense market panic. Don’t bother me with the facts, ma’am.
Before they got past the headlines, either a few traders pulled the old “fat finger” trick and screwed up the trade on this odd twist on fake news. Or, more likely, as ZH notes, it was likely the headline-driven, high-speed computer algorithms that triggered massive – and wrong – trades that gave everyone the heebie-jeebies. For at least a minute or three. So much for the intelligence part of AI, right? Oh, well, it’s only money.
But even after this flicker of pre-Halloween market terror blew itself out, Mr Market remained jittery. Averages hovered close to flatline from Wednesday morning through mid-afternoon. Until the official Fed announcement on interest rates came out. Now, we’ll see where things really go. I think.
So, what did the Fed actually do about interest rates and stuff?
Oh, yeah, the Fed, and the numbers. They cut US interest rates again by another quarter percent, just as the financial punditocracy figured they’d do.
CNBC was on the ball and ready with their report. Of course, their crack writers and copy-writers had been working from an earlier-released but still embargoed transcript. That’s how they get this stuff up so fast after the fact. Anyway, they put the news online at about 1 minute after 2 ET, moments after the Fed announcement went public.
“The Federal Reserve approved an expected quarter-point interest rate cut Wednesday while also indicating that the moves to ease policy could be nearing a pause.
“In a vote widely anticipated by financial markets, the central bank’s Federal Open Market Committee lowered its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%. The rate sets what banks charge each other for overnight lending but also is tied to most forms of revolving consumer debt.
“…the decrease came language pointing to a higher bar for future easing.”
In other words, that somewhat-expected next interest rate cut, presumably on tap for December, might or might not happen. Scary. Just like Halloween.
Re: the Fed, CNBC provides some more useful background info on those now-lower US interest rates.
“The [Fed] decision comes the same day that the government reported GDP growth of 1.9% that, while reflecting a deceleration, was above Wall Street estimates for 1.6%. Job gains, meanwhile, have slowed in recent months but are well above the 109,000 or so that the Atlanta Fed estimates are necessary to keep the unemployment rate at the 50-year low of 3.5%.
“In addition to the solid performance in the jobs market and in consumer spending, stock market averages are around new highs.”
In other words, despite the media, Congress and the Deep State all conspiring every day to scare off investors and abort the Trump Recovery – so he’ll lose Election 2020 – the economy continues to steam along. “Unexpectedly.” Imagine how we’d be doing if they’d left Trump the eff alone to continue with his MAGA plan.
What changed in the October Fed statement?
A lot of Washingtonspeak changed, that’s what. If you can bear reading through this made-in-the-USA Newspeak, just click this link to hop over to a CNBC page that gives you a copy of the statement with all the changed passages from last month’s missive duly noted in virtual red ink. Sort of like “corrections on” setting in MS Word.
And what about that US economic outlook?
What’s actually been happening with the US economy in spite of the Democrats’ Great Fake Wall of political crap is this. We still have a recovery so robust and filled to the brim with job creation, that the economy – and lower and middle-class employment – both continue to steam merrily along. Albeit at a slower pace, given the needless detours erected by an utterly do-nothing House. At taxpayer expense, by the way.
As for Mr Market, he’s still about where he was before the Fed announcement. Although as I try to finish this piece (2:37 p.m. ET), only the Dow is up on the day. And only up by 9-ish points for a 0.2 percent game. Heck that kind of move might not even buy you a Mars bar these days if you cashed out your portfolio.
The other two major averages, the S&P 500 and the NASDAQ, are down just a little more than that. At the moment, you can find both on the red ink side of flatline.
Stocks more often than not shake off their initial thoughts on these monthly Fed reports, only to put on an impressively strong rally – or drop – in the market’s closing minutes. Just because. But we have to wait a little less than an hour and a half to find out.
That’s a wrap
Meanwhile, we’re at least slightly pleased that today’s cut materialized at all. The Fed remains behind the curve, and even this latest interest rate trim might not be enough.
Stay tuned. Will toss in the closing averages with an update right here, sometime after the 4 p.m. ET closing bell.
CLOSING BELL UPDATE:
Irrational exuberance wins the day! Mr Market decided to party hearty into Wednesday’s closing bell. The Dow closed up 115.13 points for a modest gain on the day of 0.43 percent. The broader based S&P 500 closed up 9.89 for an equally modest gain of 0.33 percent. And finally, the tech-heavy NASDAQ decided to join the fun by closing up as well, by 27.12, gaining 0.33 percent on the day, just like the S&P. Perhaps a rising tide really does lift all boats. Have a good evening.
– Headline image: “The Scream” by Edvard Munch, 1893 version.
(Public domain image via Wikipedia entry on the painting, view modified by the writer)