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31Jan2018 Market Close: Wall Street Rises Off Session Lows After Fed Keeps Interest Rates Steady, Sees Inflation Rising This Year, DOW Closes 73 Points Up, SP 500 Flat

Written by Gary

The US equities main benchmarks remain in positive territory after the Fed said it sees inflation rising this year (SPY +0.05%). WTI crude rises to the high 64 handle and the gold index also rises.

Todays S&P 500 Chart

Looking at the last three columns (below), the first one (Actual), is what was reported this morning. The second column (Forecast) is what analysts had forecast and the third column is the previous report. Full calendar HERE.

The Market in Perspective

Here are the headlines moving the markets.

Fed keeps interest rates steady, sees inflation rising this year

WASHINGTON (Reuters) - The U.S. Federal Reserve kept interest rates unchanged on Wednesday but said it anticipated inflation would rise this year, in a sign it is still on track to raise borrowing costs in March under incoming central bank chief Jerome Powell.

Wall St. loses gains after Fed sees inflation rising

(Reuters) - U.S. stocks gave up earlier gains to trade lower on Wednesday after the Federal Reserve said it sees inflation rising this year, signaling it remains on track to boost interest rates again in March.

Boeing forecasts rising profit, sees end to job reductions

NEW YORK (Reuters) - Boeing Co on Wednesday forecast full-year profit well above Wall Street estimates as it looks forward to its busiest year ever for plane deliveries, sending its shares up almost 5 percent.

Japan's Fujifilm to take over Xerox in $6.1 billion deal, create joint venture

(Reuters) - Japan's Fujifilm Holdings is set to take over Xerox Corp in a $6.1 billion deal, combining the U.S. company into their existing joint venture to gain scale and cut costs amid declining demand for office printing.

U.S. food distributors allege Tyson Foods, rivals fixed chicken prices

CHICAGO (Reuters) - Top U.S. food distributors Sysco Corp and US Foods Holding Corp have joined retailer Winn-Dixie Stores [BILODW.UL] and other poultry buyers suing the country's biggest chicken processors for allegedly conspiring to inflate prices.

Blackstone bets big on Wall St. information business with Thomson Reuters deal

LONDON/NEW YORK (Reuters) - U.S. private equity firm Blackstone Group LP catapulted itself into the major leagues of Wall Street's financial information industry on Tuesday with the acquisition of a majority stake in the Financial and Risk business of Thomson Reuters Corp.

Fox pays more than $3 billion for Thursday Night Football rights: source

(Reuters) - Twenty-First Century Fox Inc has agreed to pay more than $3 billion to air Thursday night National Football League games on the Fox broadcast network for the next five seasons, a source familiar with the situation told Reuters.

CBS board to discuss potential Viacom merger on Thursday: sources

(Reuters) - CBS Corp's board is expected to discuss a merger with Viacom Inc on Thursday, sources told Reuters, a move that could begin a formal process to reunite the companies split by controlling shareholder Sumner Redstone more than a decade ago.

California insurance dept estimates nearly $12 billion in wildfires claims

(Reuters) - Insurers have received nearly 45,000 insurance claims of about $11.79 billion in losses from the wildfires that occurred in California in October and December, the California Department of Insurance said on Wednesday.

Dow Soars To Best January Since 1997, Bonds' Worst Start In 25 Years

January summed up... Bonds worst January since 1992... Dow's best January since 1997... Dollar's worst January since 1987...

Phew... that was quite a month...

Records busted everywhere...

And the S&P is now on a 15-month win-streak (never happened before) and is up for 22 of the last 23 months - since The Shanghai Accord in Feb 2016!!

But the month ended ugly with the last few days setting up for the S&P's worst weekly loss since 11/4/16 (the week before the election)...

Shrinkage & The Fed's Balance Sheet Promises

Authored by Kevin Muir via The Macro Tourist blog,

Remember all the hullabaloo back in September about the Federal Reserve's decision to shrink their balance sheet? Believe it or not, it was somewhat of a big deal and many strategists were warning about the lack of support for risk markets from this action.

Here is the actual announcement from the FOMC's press release:

Effective in October 2017, the Committee directs the Desk to roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing during each calendar month that exceeds $6 billion, and to reinvest in agency mortgage-backed securities the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month that exceeds $4 billion. Small deviations from these amounts for operational reasons are acceptable.

At the time I wasn't too fussed about the action as reducing a $4.4 trillion balance sheet by $10 billion a month didn't seem all that important.

But $10 billion is just a start. The Fed's goal is to eventually reach $50 billion a month, with the program ending in 2020 having hopefully shrunk the balance sheet to $3 trillion.

N ...

It's Back: "January Was The Most Volatile Month Since The Election"

If it seems like it was just two days ago that Goldman was writing about a Great-er moderation, and showing a chart of macro volatility - across virtually everything, not just stocks - reaching V-fib levels, it's because it was.

A lot has happened inbetween, most notably that volatility which just on Sunday night was left for dead, has made a stunning comeback, leading to another note published overnight by Goldman which breaks dramatically with the previous one, pointing out that not only did the S&P just have two consecutive 50bp+ selloffs for the first time since 2016, but that - at a time when the VIX is at a 5 month high despite the near-all time high in the S&P - January has been, on a realized vol basis, the most volatile month since Nov-2016.

Below are the detailed observations from Goldman's Rocky Fishman:

Largest drawdown in months. While hardly a sustained drawdown, the past two days' moves mark the largest selloff since August's 2.2% dip and the first time the SPX has sold off 50 bp or more on consecutive days since 2016 (by far the longest ever between two such events).

Adam Schiff: FISA Memo Could Lead To Firings Of Mueller, Rosenstein

Stocks are red. Trey Gowdy is abruptly retiring from Congress. Everybody is laughing at what looks like drool dribbling from the edge of Joe Kennedy's mouth during his rebuttal to last night's State of the Union.

And along comes Reuters, dropping a bombshell headline that, if accurate, could shift the narrative of the multiple investigations involving Russia and obstruction of justice.

Reuters quoted Adam Schiff, the top Democrat on the House Intel Committee, who believes the contents of the four-page memo about allegedly egregious FBI abuses of FISA set for public release in the next several days, could lead to the firing of Special Counsel Bob Mueller, or more likely Deputy AG Rod Rosenstein.



TOP DEMOCRAT ON U.S. HOUSE INTELLIGENCE COMMITTEE SAYS REPUBLICAN MEMO SETS STAGE FOR POSSIBLE FIRING OF SPECIAL COUNSEL MUELLER OR MORE LIKELY DEPUTY ATTORNEY GENERAL ROSENSTEIN

And:



U.S. HOUSE INTELLIGENCE COMMITTEE CHAIRMAN NUNES SAYS "NO SURPRISE" TO SEE THE FBI AND JUSTICE DEPARTMENT ISSUE "SPURIOUS OBJECTIONS" TO REPUBLICAN MEMO -STATEMENT

Now the question of course is whether this is a statement of fact - in other words the FISA memo contains cause for termination - or a smoke screen to claim that Mueller's firing is only made possible by the "political act" that is the imminent release of the FISA memo.

* * *

In an amusing coincidence, Gowdy's remarks from a Tuesday morning appearance on Fox & Friends now seem eerily prophetic...

REP. TREY GOWDY (R-SC): My Democratic colleagues didn't want us to find this information. They did everything they could to keep us from finding this information. I think it will be embarrassing to Adam Schiff once p ...

Will Insurers Follow Chubb's Lead to Recovery?

Evan Greenberg, chief executive of insurance giant Chubb, is a man on a mission. For the past few months he has been pounding the table for higher pricing in property and casualty insurance to improve returns across the industry.

Boeing Flying High, But How Good Can It Get?

Boeing has been on a tremendous streak, notwithstanding a humiliating loss in a trade tariff case regarding imports of Bombardier jets. The roaring stock price, however, should give investors pause.

Electronic Arts: On to the Next Battle(field)

In the videogame business, there's always the next battle. That works out particularly well for Electronic Arts.

There's been a spike in the number of working millennials with $100,000 saved

There have been some encouraging improvements for this generation.

Social justice warriors are coming for your outdoor cat

The issue of indoor versus outdoor cats is contentious, especially among bird lovers.

Capitol Report: Trey Gowdy is joining these other House Republican committee chairmen in retiring

Rep. Trey Gowdy on Wednesday became the latest chairman of a House committee to announce he's not seeking re-election, as the list of Republicans heading for the exits ahead of this year's midterms gets longer.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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