Roller coaster Wednesday has had its ups and downs starting off in the red, sea-sawing sideways until the FMOC meeting, then climbing to new daily highs. The SP500 set another new historic high before swan diving to the morning lows, giving up earlier gains spurred by the minutes from the Federal Reserve's April meeting that suggested an increase in interest rates wasn't likely in June. The DOW tried to make a new high, but failed by a few cents.
NEW YORK (AP) — A brief afternoon rally faded away on Wall Street, leaving indexes narrowly mixed on the day. The short-lived advance Wednesday came after minutes from the Federal Reserve's latest meeting suggested the central bank wouldn't begin raising interest rates next month. The Dow Jones industrial average slipped 27 points, or 0.2 percent, to 18,285. The Standard & Poor's 500 index gave up two points, or 0.1 percent, to 2,125. The Nasdaq composite declined a point, less than 0.1 percent, to 5,071. All three indexes wavered between gains and losses throughout the day.
NEW YORK/LONDON (Reuters) - Four major banks pleaded guilty on Wednesday to trying to manipulate foreign exchange rates and, with two others, were fined nearly $6 billion in another settlement in a global probe into the $5 trillion-a-day market.
Just two days ago we pointed out that Janet Yellen's San Francisco Fed has decided it's time to take back the media spotlight from its Atlanta counterpart which, thanks to an incredibly prescient, real-time GDP forecasting machine, has managed to make the financial news quite often after we first highlighted the "nowcast" back in March.
In sum, the San Fran Fed decided that the weak Q1 GDP data simply needed to be seasonally adjusted (again) in order to make it ...well, less weak.
The official estimate of real GDP growth for the first three months of 2015 was shockingly weak. However, such estimates in the past appear to have understated first-quarter growth fairly consistently, even though they are adjusted to try to account for seasonal patterns. Applying a second round of seasonal adjustment corrects this residual seasonality. After this correction, aggregate output grew much faster in the first quarter than reported.
Got that? There was still some "residual seasonality" (i.e. the data still looked weak) in the Q1 print after the first round of seasonal adjustments, so in order to "correct" things, a second round of seasonal adjustments needs to be applied, after which the new figures should show that the economy did not in fact flatline in the first three months of the year. Of course if the numbers still don't come out looking the way you want them, you can always rinse and repeat. As we put it two days ago:
NEW YORK (Reuters) - Five of the world's largest banks, including JPMorgan Chase & Co and Citigroup Inc, were fined roughly $5.7 billion, and four of them pleaded guilty to U.S. criminal charges over manipulation of foreign exchange rates, authorities said on Wednesday.
ATHENS (Reuters) - Greece will not be able to make a payment to the International Monetary Fund due on June 5 unless foreign lenders provide more aid, a senior ruling party lawmaker said on Wednesday, the latest warning from Athens that it is on the verge of default.
WASHINGTON (Reuters) - U.S. Federal Reserve officials believed it would be premature to raise interest rates in June and that a bump in inflation was being offset by a weaker labor market and softer data, according to minutes from the central bank's April policy meeting.
WASHINGTON/DETROIT (Reuters) - Japanese air bag manufacturer Takata Corp is doubling a recall of potentially deadly air bags to nearly 34 million vehicles, making it the largest automotive recall in American history, U.S. safety regulators said on Tuesday.
Ten days ago, in "Why There Is No Treasury Liquidity In One Chart" we explained quite simply why there is no more Treasury market liquidity. To wit:
... while the Fed's holdings expressed in 10 Year duration terms have so far peaked at around 35% of total, a level which many expected wouldn't be dire enough to lead to the evaporation of bond market depth also known as liquidity, what happened since then is that coupled with the surge of HFTs in bond market trading which contrary to popular opinion not only doesn't provide, but soaks up liquidity, the 30% 10 Year duration threshold which had previously been greenlighted by the TBAC, ended up being far too high and as a result events such as the October 15 flash smash, and the May 2015 Bund flash crash, have become a normal and regular feature of the fragmented, central bank-manipulated and HFT-dominated markets.
Today, for the first time ever and in a very shocking development, the Fed admitted not only that at least one half of this assessment of bond market liquidity is accurate but that what Zero Hedge has been saying since 2009: that HFTs do not provide liquidity but soak it up, has been absolutely correct. From the FOMC minutes:
... it was suggested that the tendency for bond prices to exhibit volatility may be greater than it had been in the past, in view of the increased role of high-frequency traders, decreased inventories of bonds held by broker-dealers, and elevated assets of bond funds.
As for the accuracy of the other half of our statement, which would entail the Fed admitting that term ...
Econintersect: The 29 April 2015 meeting statement presented the actions taken. This post covers the economic discussion during this FOMC meeting between the members. The was a significant amount of discussion on the state of the economy and the zero bound monetary policy. It appeared the FOMC members were divided on what was actually happening to the economy but were more cohesive in believing this was not the time to raise the federal funds rate:
... However, most participants felt that the timing of the first increase in the target range for the federal funds rate would appropriately be determined on a meeting-by-meeting basis and would depend on the evolution of economic conditions and the outlook. In keeping with this data-dependent approach, some participants further suggested that the postmeeting statement's description of the economic situation and outlook, and of progress toward the Committee's goals, provided the appropriate means by which the Committee could help the public assess the likely timing of the initial increase in the target range for the federal funds rate......
Issued with light-speed typing and proofing, The Wall Street Journal's Jon Hilsenrath explains what we should think about the Fed's minutes...
Federal Reserve officials meeting in late April doubted they would be ready to raise short-term interest rates by midyear, according to minutes of the meeting released Wednesday.
Fed officials are trying to make sense of a first-quarter economic slowdown. Many at the April 28-29 policy meeting believed temporary factors were holding the economy back. Before they lift rates, they want to be confident growth is on track, unemployment will keep falling and inflation will gradually rise toward their 2% goal.
The minutes, released with the regular three-week lag, showed that only a few Fed officials thought they would have enough confidence those conditions would be met by the June 16-17 meeting.
"A few anticipated that the information that would accrue by the time of the June meeting would likely indicate sufficient improvement in the economic outlook to lead the Committee to judge that its conditions for beginning policy firming had been met," the meeting minutes said.
"Many participants, however, thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, although they generally did not rule out this possibility."
Many Fed officials began the year believing they might start raising short-term interest rates from near zero by midyear, but the winter slowdown has sidetracked their plans. The Commerce D ...
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