Markets could use some clarity and will hopefully get some from the Fed this afternoon.  Fed funds futures points to a 66.3% implied likelihood of a rate hike at the conclusion of this today’s policy meeting.  Normally, the day of a Fed rate decision the Fed Fund futures are closer to 100%.  A reading of 66.3% means there is confusion regarding what the Fed is going to do. 

There are numerous scenario’s that could play out tomorrow, yet market participants disagree as to the outcome of the different scenarios.  Rather than try and outguess the markets, it is more important to pay attention to the reaction and let the markets tell you what they have to say.  An old rule on Wall Street was the initial reactions of the markets is usually the wrong one, let’s see if it holds true today. 

What the Fed needs to do is to calm equity markets.  If we get some clarity from the Fed, it could clear the way for Santa Claus to visit Wall Street.  WSS Christmas list.

Dear Mr. Santa, please let the Fed:

• Acknowledge the economy has slowed, especially housing
• Note weakening global growth outlook
• Let the markets know the Fed is aware of the recent decline in equity market
• Mention that the decline in oil should help keep inflation in check
• Wage inflation is an ok thing and better than no inflation
• Lower the monthly amount of liquidity being unwound from the markets
• Let markets know decisively the Fed is going to take a step back 

President Trump has made it clear he wants the Fed to read his tweets, “No More Rate Hikes.”

Yesterday, the President called out the Fed and requested they avoid making "yet another mistake." President Trump tweeted, “I hope the people over at the Fed will read today's Wall Street Journal Editorial before they make yet another mistake. Also, don't let the market become any more illiquid than it already is. Stop with the 50 B's. Feel the market, don't just go by meaningless numbers. Good luck!” 

The President would like the Fed to not only stop increasing interest rates to quell inflation, but also stop unwinding their balance sheet.  The Fed flooded the economy with liquidity by purchasing U.S. Treasuries and mortgage securities from financial institutions.  In an effort to unwind its quantitative easing, the Fed is allowing these securities to mature and not roll over the proceeds, thus lowering their bond portfolio.  Since the program began in October 2017, roughly $374 billion has rolled off their portfolio.  This may be drawing liquidity out of the markets and causing some of the volatility the markets are experiencing.       

Existing Home Sales

• Existing homes sales unexpectedly rose 1.9% in November to an annual rate of 5.32 million
• Year-over-year down 7%, largest annual drop since May 2011
• The inventory of previously owned homes rose to 1.74 million from 1.67 a year ago
• Inventory to sales declined to 3.9 months, down from 4.3 months in October
• First-time buyers rose to 33% from 31% in October and 29% a year earlier

Lower mortgage rates and rising wages may be breathing life into the ailing housing market.  This would be welcome news for the economy, housing services make up roughly 12-13% of GDP. 

Today’s rally has been broad based, with transports and semiconductors the only sectors lower on the day.  Energy is leading, up 1.75%, with crude oil trading higher by 3.37%, $1.56, @ $47.80. 

According to the Washington Post, Facebook (FB) is being sued by Washington D.C. Attorney General over the Cambridge Analytica scandal.  FB is trading lower by 6.5%.