FOMC Disappoints Market And Heads Down

July 11th, 2012
in Gary's blogging

Midday (2PM) Market Commentary For 07-11-2012

The FOMC meeting at 2PM left investors still wondering what, if anything, the FED plans to do in a completely sterile commentary we are so used too.


Fed Minutes: "Few Fed Members Said More Stimulus Would Be Needed"

Just because Bernanke did not explain everything in the post-FOMC conference, here is more:

Follow up:

  • A few FOMC members said more stimulus would probably be needed

  • Several on FOMC said fed should study `new tools' for easing - c5 galaxy??

  • FOMC participants saw moderate growth likely in coming quarters

  • FOMC agreed `it was prepared' for further action as appropriate

  • FOMC saw `unusually high' uncertainty for jobless, growth

  • Several other FOMC members saw action need if economy worsens

Well, more stimulus was needed, and we got it in the form of Operation Twist 2. Nothing new, but algos need their flashing read headlines.


. . . traders have largely shrugged off the release of a report from the Commerce Department showing that the U.S. trade deficit narrowed in the month of May, as the value of exports rose and the value of imports fell.

The report showed that the trade deficit narrowed to $48.7 billion in May from a revised $50.6 billion in April. The narrower deficit came in line with economist estimates.

The DOW at 2:15 is at 12568 down 85.98 or -0.68%. (and still going down)

The 500 is at 1337 down 3.78 or -0.32%.

The $RUT is at 790.38 down 4.94 or -0.62%.

SPY is at 133.76 down 0.29 or 0.22%.

The trend is neutral and the current bias is negative.


WTI oil is at 85.50 trading between 83.98 and 86.50 and the bias is negative.

Brent crude is at 94.74 trading between 97.85 and 100.32 and the bias is negative.

Gold is down today at 1569, trading between 1566 and 1582 with a negative bias.

Dr. Copper is at 3.41 up from 3.39 earlier.


Report highlights social cost of crisis in eurozone. Around 3.5M jobs have been lost in the eurozone since the 2008 financial crisis, a report from the International Institute for Labour Studies shows, and a further 4.5M jobs are at risk. If eurozone leaders fail to make job creation a priority, the region's 11% unemployment could rise sharply, "fueling social unrest and eroding citizen's confidence in national governments, the financial system and European institutions."

Under the “Why Am I Not Surprised” title is the following from Zerohedge.

BLS Comes Clean That Market-Moving Data Is Consistently Leaked

The Labor Department released a report Tuesday [07-10-2012] investigating possible leaks of economic data and raised concerns about self-identified new organizations that primarily serve high-speed stock traders. These 'news' agencies - enabling profits to be made from the millisecond early data release include (and have since had access revoked) 'Need To Know News' and RTTNews.

But the most telling insight from the report, noted by USAToday, is the following: The room where news organizations, including The Associated Press, receive early copies of the employment report is supposed to be secure.

Before the data were released, reporters gave up their cell phones and temporarily lost Internet access.

But the system still suffered from security flaws, according to the report conducted by Sandia National Laboratories on behalf of the Labor Department.

So, it seems that BLS has consistently been leaked 'early' as the report outlined 'ways that technology could be used to bypass security and prematurely leak the data... including hidden transmitters in computer equipment and compromised phone or data lines," and proposes access be granted to 'the room' based on "whether a news outlet produces original reporting and distributes it to a wide audience".

And one more to make your day.

Chart Of The Year: The Fed Has Doubled The S&P Admits... The Fed

Prepare to have your minds blown courtesy of what is easily the most astounding chart we have seen in a long, long time, prepared by the economists at the, drumroll, New York Fed, which finds that absent what the Fed calls "Pre-FOMC Announcement Drift", or the move in the S&P in the 24 hours preceding FOMC announcements, the S&P 500 would be at or below 600 points, compared to its current level over 1300.

The reason for the divergence: the combined impact of cumulative returns of in the S&P on days before, of, and after FOMC announcements. But, but, fundamental, technical, coffee grinds, Finance 101, Oprah Winfrey, Jim Cramer and Econ 101 analysis (in declining order of relevance and increasing order of voodoo) all tell us this is im-po-ssible? Because if the Fed is right about the Fed induced drift, it is all about, you guessed it, easy money.

And from the Telegraph, this is from the “I Told You So” chapter.

Ambrose Evans-Pritchard provides some lunchtime reading on Angela Merkel, a permanent bail-out fund, and Germany breaking the rules - again:

You can see why Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble are back-pedalling so frantically over the EU summit deal.

While Mrs Merkel seemingly agreed to let the European Stability Mechanism (bail-out fund) rescue banks directly – starting with Spain – she did not have the authority from the Bundestag to do so.

Indeed, she violated a categorical prohibition by the budget committee or Haushaltsausschuss.

The wording of Amendment 2 to the finance law on the 26th June states [...]that the ESM may not be used to recapitalise banks directly. Any such loans must guaranteed by the signatory to the treaty, ie the sovereign state, piling up further public debt.

Chancellor Merkel is wading into deep waters here. The constitutional court ruled last September that the government must obtain prior approval from the Bundestag before committing to further bail-outs – at least that is how I understood it, as did the key committees in parliament.

To contact me with suggestions or deserved praise:

Written by Gary

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