51st record close for the S&P today
The S&P and Nasdaq is closing at yet another record close
- For the S&P it is the 51st record close for the year.
- The S&P and Nasdaq have closed higher for the 5th consecutive day
- The Dow is up for the 4th day in a row.
- Dow is less than 1% from its all-time high
The final numbers are showing:
- The Dow rose 39.24 points or 0.11% at 35405.50
- The S&P rose 9.96 points or 0.22% at 4496.19
- the NASDAQ index rose 22.06 points or 0.15% at 15041.86
- Russell 2000 rose 8.36 points or 0.37% at 2239.27
Financials, energy, industrials led the way to the upside, while healthcare, consumer staples, real estate and technology lagged.
Some specific winners included:
- Western Digital, +7.87%
- Uber, +3.41%
- American Express, +3.11%
- Micron, +2.8%
- Novavax, +2.21%
- JP Morgan, +2.06%
- PNC financial, +1.96%
- Delta Airlines, +1.92%
- Wells Fargo, +1.92%
- Nvidia, +1.88%
Some specific losers included:
- express, -11.43%
- Koss, -6.6%
- Game Stop, -4.9%
- Blackberry, -3.24%
- Palantir, -2.91%
- Tencent, -2.57%
- Biogen, -1.89%
- Pfizer, -1.82%
- Beyond Meat, -1.6%
- Alibaba, -1.51%
The FOMC meeting minutes for the July 27-28, 2021 meeting
The FOMC meeting minutes for the July 27-28 meeting have been released. Since the minutes are not released ahead of time, the highlights will be trickling in.
You can find the minutes HERE
- Participants expressed a range of views on the appropriate pace of tapering asset purchases once economic conditions satisfied the criterion laid out in the Committee’s guidance.
- At the same time, participants indicated that the standards for raising the target range for the federal funds rate were distinct from those associated with tapering asset purchases and remarked that the timing of those actions would depend on the course of the economy.
- Several participants noted that an earlier start to tapering could be accompanied by more gradual reductions in the purchase pace and that such a combination could mitigate the risk of an excessive tightening in financial conditions in response to a tapering announcement.
- Most participants remarked that they saw benefits in reducing the pace of net purchases of Treasury securities and agency MBS proportionally in order to end both sets of purchases at the same time.
- Several participants commented on the benefits that they saw in reducing agency MBS purchases more quickly than Treasury securities purchases, noting that the housing sector was exceptionally strong and did not need either actual or perceived support from the Federal Reserve in the form of agency MBS purchases or that such purchases could be interpreted as a type of credit allocation.
- Many participants noted that, when a reduction in the pace of asset purchases became appropriate, it would be important that the Committee clearly reaffirm the absence of any mechanical link between the timing of tapering and that of an eventual increase in the target range for the federal funds rate.
- With respect to the effects of the pandemic, several participants indicated that they would adjust their views on the appropriate path of asset purchases if the economic effects of new strains of the virus turned out to be notably worse than currently anticipated and significantly hindered progress toward the Committee’s goals.
- The staff judged that asset valuation pressures were elevated. In particular, the forward price-to-earnings ratio for the S&P 500 index stood at the upper end of its historical distribution; high-yield corporate bond spreads tightened further and were near the low end of their historical range; and house prices continued to increase rapidly, leaving valuation measures stretched. That said, the staff did not see signs of loose mortgage underwriting standards or excessive credit growth that could potentially amplify a shock arising from falling house prices.
- The staff’s near-term outlook for inflation was revised up further in response to incoming data, but the staff continued to expect that this year’s rise in inflation would prove to be transitory.
- The staff expected the 12‑month change in PCE prices to move down gradually over the second part of 2021, reflecting an anticipated moderation in monthly inflation rates and the waning of base effects; even so, PCE price inflation was projected to be running well above 2 percent at the end of the year.
- Over the following year, the boost to consumer prices caused by supply issues was expected to partly reverse, and import prices were expected to decelerate sharply; as a result, PCE price inflation was expected to step down to a little below 2 percent in 2022 before additional increases in resource utilization raised it to 2 percent in 2023.
- The staff continued to judge that the risks to the baseline projection for economic activity were skewed to the downside and that the uncertainty around the forecast was elevated. In particular, the probability that the course of the pandemic would turn out to be more adverse than the staff’s baseline assumption was viewed to be higher than the probability that a more favorable outcome would occur.
- the staff judged that the risks around the inflation projection were now tilted to the upside, as recent data pointed to a greater risk that the upward pressure on inflation that had resulted from supply-related issues would unwind more slowly than the staff’s baseline projection assumed.
- A majority of participants noted that the spread of the Delta variant may temporary delay the full reopening of the economy and restraint hiring and labor supply
The WSJ said:
- Minutes show thinking on preparations to begin reducing Federal Reserve’s asset purchases later this year
- Federal Reserve preparing for taper this year, July minutes show
- central bankers want to be clear that the reduction of assets was not a precursor to and a minute rate hike
- Fed officials see inflation goal hit, divided on taper.
BOJ governor, Haruhiko Kuroda, begins his press conference
- But Japanese economy remains in an extremely severe siituation
- Pace of recovery to only be moderate
- Inflation is likely to be negative for the time being
- Future economic developments remain extremely unclear
- Risks are tilted to the downside for prices, economic growth
- BOJ won’t hesitate to ease further if needed
- Will continue to support corporate financing, markets
Kuroda is still maintaining a more subdued take on the economic situation but that is hardly a surprise. The recent economic data from Japan have been rather poor and a possible virus resurgence only adds to more risks surrounding the outlook.
But Kuroda stands firm in assuring that the BOJ policies since March are having an impact, though I’m sure they pretty much lucked out on this one with the Fed and ECB doing most of the heavy lifting to appease financial risks in the market for the most part.
As was noted during the US time zone, EUR/USD pierced 1.14. A factor that appears to have flown under the radar is this sign of (continued) aggressive policy support from the ECB, that is:
- ECB corporate bond-buying was up 3.3bn EUR last week, which is around 400m higher than the previous record high over the past 4 years operation of the Bank’s corporate bond purchasing program
ps, ICYMI, the EU Recovery Fund will be the discussion point of note for markets in the ECB meeting Thursday
- financing totalling up to EUR750 bn, split between grants of EUR500 billion and loans of EUR250 billion
- Netherlands, Austria Denmark and Sweden want to reduce the amount of funds distributed as grants
Moody’s not interested in a lawsuit
Print all you like, spend all you like. No one is downgrading the USA after S&P did and the government sued them for $1.5B for mortgages. Even the company knew what it was all about
At the same time, a country that prints its own money can’t default. But they can devalue.
Bloomberg report on Japanese investors, facing ongoing negative rates domestically, are buying dollars and risk assets
- “The presence of the Japanese as the main carry trade driver seems to be growing as they must turn to overseas investments”
Demand for higher-yielding American assets growing
- In April, Japan’s money managers bought the most U.S. corporate debt in eight years and the second-highest amount of equities in five years
- “Japanese investors use yen to fund purchases of Treasuries or U.S. corporate bonds, for instance, to seek credit spreads and these flows are continuing,” said Koichi Sugisaki, a strategist at Morgan Stanley MUFG Securities Co. in Tokyo.
Check out USD/JPY … its net more or less unchanged, even a little lower, since November last year …. Without all the Japanese money leaving yen into USD it’d have to be lower I guess?
Fitch Ratings has revised the Outlook on India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the rating at ‘BBB-‘.
KEY RATING DRIVERS
The revision of the Outlook to Negative on India’s Long-Term IDRs reflects the following key rating drivers:
The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden. Fitch expects economic activity to contract by 5% in the fiscal year ending March 2021 (FY21) from the strict lockdown measures imposed since 25 March 2020, before rebounding by 9.5% in FY22. The rebound will mainly be driven by a low-base effect. Our forecasts are subject to considerable risks due to the continued acceleration in the number of new COVID-19 cases as the lockdown is eased gradually. It remains to be seen whether India can return to sustained growth rates of 6% to 7% as we previously estimated, depending on the lasting impact of the pandemic, particularly in the financial sector.
The humanitarian and health needs have been pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with additional relief spending representing only about 1% of GDP by our estimates. Most elements of an announced package totalling 10% of GDP are non-fiscal in nature. Some further fiscal spending of up to 1 percentage point of GDP may still be announced in the next few months, which was indicated by a recent announcement of additional borrowing for FY21 of 2% of GDP, although we do not expect a steep rise in spending. (more…)
Roach is a former Morgan Stanley Asia chairman and is now a senior fellow at Yale University.
- “The U.S. economy has been afflicted with some significant macro imbalances for a long time, namely a very low domestic savings rate and a chronic current account deficit”
- “The dollar is going to fall very, very sharply.”
Roach spoke in an interview with CNBC, called for a 35% fall in the dollar.
- “These problems are going from bad to worse as we blow out the fiscal deficit in the years ahead”