Daily Market Color

Markets Fluctuate as Traders Wait for Clues in this Afternoon’s FOMC Minutes

Stocks fluctuated while Treasury yields and swap rates sold off marginally as investors await the release of the September FOMC minutes and the start of corporate earnings season.  The minutes are expected to provide some insight as to how close policymakers came to raising rates last month.  Some expect the report may lean more hawkish than the statement and Yellen’s press conference based on comments from committee members since the conclusion of the September meeting.  6 of the 17 committee members came into the meeting recommending at least two hikes by year end, so it will be interesting to see how their views are reflected.  It’s worth noting that the minutes won’t reflect the Fed’s view on last Friday’s disappointing payrolls report, since the meeting was held beforehand, but they should touch on headwinds related to China’s decelerating economy.  

The divergence between the strength of the US economy and the rest of the world continues to grow.  In an interview with Bloomberg, former Fed Chairman Bernanke credited this to the early action taken by the Fed in the form of rate cuts and quantitative easing.  He said Europe still hasn’t gotten back to its pre-crisis level because it took the ECB 6 years longer to launch QE.  Data released overnight included reports that showed German exports plunged 5.2% in August and Japan’s core machinery orders declined 5.7% during the same period.  In the US, initial jobless claims fell more than expected to a near 42-year low, providing a less gloomy view of the labor market compared to last Friday’s payrolls report.

Aside from the Fed minutes, the market gets the $13 year bond auction at 1pm ET and a variety of Fed speakers including Bullard (hawk, voter ’16), Kocherlakota (dove, non-voter ’15/16), and Williams (hawk, voter ’15).  Alcoa and Cisco kick off earnings season after the close.


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