Markets Mixed – Fed Announces No Change Again

The Fed released their highly anticipated statement this afternoon, which as expected, showed no change in rate policy for this meeting.  One new phrase in the policy statement was picked up by the financial press, noting that “risks have diminished to US economic activity looking forward”.  This is viewed by some as an indicator that the Fed is positioning to tighten at one of the upcoming meetings, although the hesitance with which the Fed has moved on rates since December have many skeptical that this language is all that indicative of a change of stance.  The Kansas City Fed President, Esther George, dissented.  She was in favor of a quarter point increase relative to her support to leave rates unched in the previous meeting.

The market’s reaction to the Fed decision thus far has been a moderate rally in the fixed income markets as well as in the dollar index.  As of this writing we see treasury and swap rates down about 2 to 4 bps in various maturities.  The Bloomberg Dollar Spot Index climbed by 5.09 points to 1,204.18 as shown in the Bloomberg chart below.

US stocks are mixed today, seeing some increases in certain technology shares led by the release of Apple’s earnings report which showed better than expected iPhone demand. Unlike Apple, Twitter stock dropped nearly 10% on the day after falling well short of third-quarter revenue projections. The NASDAQ 100 Index has gained 0.6% while the S&P 500 is down 0.2% and the Dow Jones is close to unchanged.

In international market news, Egypt’s equities saw the most significant increase, with Egyptian stocks rising 5% in response to the government’s current negotiation involving an International Monetary Fund aimed to stimulate the hurting economy. The Japanese Yen lost 1% value against most other currencies while their stock market firmed, following Japan’s Prime Minister Abe’s release of a 28 trillion yen ($265 billion) stimulus package. This fiscal package is intended to energize domestic demand as well as generate pressure to sway the Bank of Japan to discuss opening up their own monetary stimulus plan in this week’s meeting.  

Meanwhile, commodities such as copper, zinc, lead and oil are all trading lower.  Zinc and lead each fell 1%, copper is down 0.7% and oil dropped once again as US crude inventories were reported higher. Gold was one of the few commodities that saw an increase – up 0.6% to $1,329 an ounce.

In other news of interest, drama at the Democratic National Convention continues to lead the headlines with Bernie supporters still dissatisfied and the release of more details from the DNC email hacking incident. It’s now estimated that 20,000 emails were made public, pointing to evidence of party officials undermining the Bernie Sanders’ campaign. Barack Obama along with private security experts and government officials suspect the Russian government could be involved, however Russia continues to deny involvement.