I am the one who knocks

rosey

Fed Official Opens Mouth, Stocks Promptly Plunge

in central banks/Equities by

Everything was all fine and good this morning and then… a Fed official opened their mouth.

The Boston Fed’s Eric Rosengren (a voting member) hit the tape around 8:15 ET with the following rather hawkish-sounding commentary:

“A failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery. Some observers argue that the fragile global economic situation could justify an even more patient U.S. monetary policy, simply on risk management grounds. In this debate I would offer the observation that, while it is important to acknowledge the presence of global risks, market indicators have so far provided little evidence of outsized risks”.

And this is what happened to stocks immediately thereafter:

rosey

Oops. So now we’re down nearly 200 on the Dow and as you can pretty clearly see from the following, yields responded to Rosengren’s perceived hawkishness as well.

yields

Then, as if that wasn’t enough, the Fed’s Daniel Tarullo showed up on CNBC and said the following:

TARULLO: WOULDN’T FORECLOSE POSSIBILITY OF RATE RISE THIS YEAR
TARULLO: INFLATION RATE HAS NOT BEEN AT OR NEAR 2% FOR YEARS
TARULLO: WANT TO SEE ACTUAL EVIDENCE THAT INFLATION WILL RISE
TARULLO: LABOR MARKET HAS BASICALLY BEEN FLAT FOR A WHILE
TARULLO: ISM SURVEYS SUGGEST SOME GROUNDS FOR QUESTIONING
TARULLO: NO ONE SHOULD FOCUS ON PARTICULAR PIECES OF DATA

Well, it’s good that no one “should focus on particular pieces of data,” because the Fed surely hasn’t at least when it comes to jobs. But he did manage to sneak that ISM safety valve in there, which is now serving as a kind of “get out of jail free” card for the September meeting (more here).

Oh, and then we also got Kaplan with this:

KAPLAN: RATE HIKE CASE HAS STRENGTHENED IN LAST FEW MONTHS

And in case that wasn’t enough Fedspeak for you, Kaplan will be talking again tonight at the Dallas Security Traders Association convention around 8 ET.

The moral of the story is that this band of merry PhDs needs to go back to being little known technocrats instead of playing celebrity economists because this is becoming a traveling roadshow.

6 Comments

  1. Dirty Dogs! They killed my TLT verticle 23Sep16 138.5c/114.5c! Now I need to cover because those PhD maniacs are just creating a “boogeyman” shock that I won’t get back in 14 days.

  2. When I was growing up in Texas, there was a popular saying about the state legislature: “They are like the giant, tree roaches that invade our homes. It’s not so much what they consume as what they mess up.” The same could apply to the Fed. My advice to Fed members? Between regular meetings, just STFU…..

  3. This whole Fed drama reminds me of an old Ken Nordine Word Jazz riff; “Doomsday boys and girls of dust come blow your horns for Mr. Must. Full circles roll in spirals down into the fright of the thinnest town”(read Wall Street). The Fed has no business manipulating markets in a “Free Economy”. When has the government excelled in anything? When did bankers suddenly become honest?

  4. That ES chart doesn’t really support the notion that the sell-off was triggered by Rosengren. It started to go down at least 3 hours before.

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