Suddenly, the Fed is wrapping itself around a term that wasn’t heard a month ago. The Fed rate ‘skip’ suggests a pause at the next Federal Open Market Committee (FOMC).
So, this is like a punt that buys time to peruse incoming data and avoid going too far. I think the breaking news is the Fed can see the writing on the wall. The option has come up more often as the Federal Reserve grapples with the obvious slowdown of parts of the economy while pockets of ‘strength’ continue to gnaw at the Fed and their fellow economists. breaking things and could go too far.
It sounds simple, but so does skipping rocks over a body of water (see instructions below), and we all know people that can’t seem to get the hang of it.
How to Skip Rocks
Skipping rocks is a fun outdoor pastime that you can do without any special equipment.
1. Go to a large body of water when the weather is calm.
2. Look for a flat, smooth stone near the water.
3. Hold the stone between your thumb and middle finger.
4. Hook your index finger around the edge of the rock. Firmly wrap your index finger around the rock. Your index finger adds spin to the rock once you throw it to help it skip across the water's surface.
The market was lurching lower and appeared ready to stumble big time when those Fed speakers commented about a possible rate ‘skip.’
Historic haven sectors caught a bid while those sizzling sectors experienced some profit-taking.
Skip – Shift
It didn’t take long for the Street to adjust to open musings of a rate ‘skip’ to make a complete reversal. Yesterday morning, the odds were overwhelming (72%) for a rate hike at the next meeting; now, the odds are overwhelming that rates will remain the same.
But the odds also still see a rate hike this summer and a series of rate cuts beginning in November. So, it is beginning to feel like this next FOMC gathering won’t move the needle much, even if it is a rate hike. Instead, the question-and-answer period will set the tone – big time!
Last night CrowdStrike (CRWD) reported earnings which beat on the top and bottom line, as well as raised guidance, but the street didn’t seem to care. The stock is down almost 10% in the pre-market. Not sure what is driving this, and we are looking closer, but my goodness.
There are no sector weighting changes in our Hotline Model Portfolio this morning.
The headline number from ADP jobs report nudged stocks lower in preopen trading. But a closer look shows there are more troubling signs than optimism; 75% of the jobs were in leisure and hospitality. While it underscores all the YOLO spending, as we have discussed, even with pay raises, these are not the jobs that carry the economy.
In fact, pay growth continues to come down even for job changers.
The good news is small businesses can hire workers being laid off from larger companies with less wage pressure.
Initial jobless claims were just about in line with consensus and continue to edge higher.
I think the big story tomorrow when the government releases its employment data will be slower wage growth.
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