Stocks and Treasuries Little Changed in Light Trading Ahead of Holiday Weekend

Stocks, Treasury yields, and swap rates all traded close to unchanged as markets continued to digest yesterday’s more dovish than expected FOMC minutes.  Traders appear to be ignoring individual Fed policymakers who have come out and said they still anticipate a rate hike before year end, instead focusing on the more conservative sounding September policy statement and minutes.  The minutes revealed that the Fed held off on raising rates last month because of concerns that inflation could remain stagnant, held down by the stronger dollar, declines in oil and other commodities, and weak global growth.  Some officials characterized the September decision as a close call, but the minutes don’t suggest there was a strong disagreement, evidenced by only one dissenter (Lacker).  Ultimately they decided additional information is needed to ensure that headwinds abroad in China and emerging markets don’t materially alter the outlook for the US economy.  There are two remaining FOMC meetings in 2015.

Today’s data in the US was mainly second tier.  A report showed US import prices fell only slightly in September, which means the rate of imported deflation is slowing, thanks in part to the recent recovery of oil prices.  The Fed has maintained that deflationary pressures are transitory and the report is consistent with that.  Aside from the data, the Fed’s Lockhart (dove, voter ’15) and Evans (dove, voter ’15) are scheduled to speak.  No companies report earnings, but the calendar picks up next week headlined by the big banks (JPM, Citi, BoA, Wells, Goldman), Johnson & Johnson, and Delta among others.

Fixed income markets are closed Monday in honor of Columbus Day.  Have a great weekend.