It was another decidedly defensive seesaw session yesterday. Growth sectors continue to burnish their evolved role as safe havens as well. The S&P 500 is in the shadow of its 200-day moving average at 4,410. 

The Federal Open Market Committee (FOMC) minutes hammer home the notion of ‘higher for longer’ and potentially more rate hikes.

“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated. The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.

The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5¼ to 5½ percent.

The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans."

Yields Retreat

Bond yields came down as treasuries resumed their traditional role as the actual ‘flight to safety’ trade.

IPO Bust

If you had told the family that created Birkenstock in 1774, the company would one day raise $495 million in an initial public offering (IPO), and they would have asked, “What’s an initial public offering?”  Over the last 15+ years, a liquidity event has duped the American public out of hundreds of billions of dollars.

I’m not casting aspersions on BIRK. I haven’t read the F1, which has 223 pages of commentary and another 98 pages of financials.

There are many fabulous pictures (see below) and trivia (how many bones and muscles are in the human foot?).

But there lies the problem. No one will read 223 pages of commentary and 98 pages of financials.

The stock priced at $46, the midpoint of the $44 and $49 expected range, and it began trading at $41.00. It's too soon to know if those first eager buyers stepped in it, but for now, it’s another cautionary tale on initial public offerings (IPOs).

Today’s Session

The market was edging higher into the CPI print, and then…it stumbled.

Year to year CPI came in-line with consensus on the headline but core was 3.7% versus consensus of 3.6%.

The headline 0.4% was slightly ahead of the street +0.3%, as core was in-line.

The main issues are shelter, which is supposed to be moving lower, and transportation services, which reflects the cost of fuel being passed on to customers.

Selling will spark some additional selling, but it’s unlikely these results have changed anything at the Fed.

 

 

 

 

 

 

 

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