S&P 500 Hits New Record High as Fed Minions Flood the Zone

At 3,013.77, the S&P 500 (Index: SPX) closed at the highest level in its history on Friday, 12 July 2019, having spent the entire day trading above 3,000 for the first time ever.

Then again, the index has achieved new record high closing values 11 times in the last four weeks. What is more notable is that investors have continued to set their forward-looking focus on 2020-Q1 in setting stock prices…

Even though investors are now expecting the Fed to cut short term interest rates in the U.S. three times in upcoming months, with quarter point reductions expected after the Federal Open Market Committee concludes upcoming meetings on 31 July 2019, on 18 September 2019 and on 11 December 2019.

Investor expectations of a fourth quarter point rate cut being announced in 2020-Q1 has been oscillating about the 50% probability mark in recent weeks, with the CME Group’s FedWatch Tool indicating the probability of that event being around 35% as of the end of trading on 12 July 2019.

That’s where most of the action has been for investors looking forward in time in making their current day investing decisions ahead of the earnings season for 2019-Q3 officially getting underway in the next week, as Fed officials have been ‘flooding the zone‘ in attempting to set future expectations. Here are the market-moving headlines we extracted from the week’s news, where you can see the unusually large representation of statements made by the Fed’s minions among the regular flow of news on Wednesday and Thursday….

Monday, 8 July 2019

• Oil steadies as demand worries offset Iran’s new nuclear threats
• Bigger trouble developing in China all over:

• China refiners curb fuel output after massive new plants stoke glut
• Japan machinery orders fall most in eight months in worrying sign for economy
• Euro zone investor morale falls further in July, German recession looms: Sentix

Bigger stimulus developing in China all over:

• China June new loans seen at 5-month high as central bank keeps liquidity ample: Reuters poll
• Fed easing could prompt first China rate cut in four years – analysts
• ‘The Incredible Disappearing Bond Yields’

Wall St. drops as Apple falls, Fed eyed

Tuesday, 9 July 2019

• Oil rises more than 1% after U.S. stockpile drop; Brent nears $65
• White House’s Kudlow sees room for Fed to reverse rate hike

• Fed’s Harker sees ‘no immediate need’ for U.S. interest rate cut: Wall Street Journal
• Atlanta Fed’s Bostic: Officials debating merits, risks of ‘hotter’ economy

S&P 500 ekes out gain though profit worries weigh

Wednesday, 10 July 2019

• Oil prices jump 4.5% on U.S. crude stocks draw, Gulf of Mexico storm
• Bigger stimulus developing in China:

• China’s 2019 growth seen slowing to 6.2% as trade war weighs
• China June exports seen falling, adding to fears of global slowdown: Reuters poll
• China’s producer prices stall in June, fuel deflation worries

Powell testimony, Fed meeting highlight case for ‘insurance’

• Fed’s George says does not look like inflation set to surge
• Many Fed officials saw near-term rate cut, not all convinced: minutes
• Instant view: Powell – Fed stands ready to act “as appropriate” to sustain expansion
• U.S. Fed policy-makers debate merit of a repo facility

Wall Street touches new highs after comments by Fed’s Powell

Thursday, 11 July 2019

• Oil falls on dim OPEC demand outlook, pares gains from Gulf of Mexico storm
• Bigger trouble developing in China all over:

• Australia’s mortgage mountain a deadweight on spending: central bank research

Bigger stimulus developing in China all over:

• China second-quarter GDP growth seen easing to 6.2%, more stimulus expected: Reuters poll
• Australia’s rate cuts, tax rebate helping economy, says central bank governor
• ECB ready to ease again as inflation goal is ‘some distance away’
• IMF sees prolonged anemic growth in euro zone, urges ECB stimulus

Fed minions try to steer expectations, in all different directions:

• Fed’s Powell affirms rate cut view; others see U.S. economy humming
• Fed’s Barkin sees risks to U.S. economy: Bloomberg

• Fed’s Barkin sees little case for cutting interest rates
• Fed’s Barkin leaves door open to ‘insurance’ cut

Bostic: Fed’s focus is its mandates not market pricing for rate cuts

• Fed’s Bostic says outlook among businesses remains stable despite rising risks

Fed’s Kashkari says need ‘stronger medicine’ to boost inflation

Fed’s Brainard signals support for rate cut

Fed’s Williams says case for a U.S. rate cut is stronger

• Fed’s Williams says he does not see elevated U.S. recession chance

S&P 500, Dow climb as health insurers, financials gain

Friday, 12 July 2019

• Oil flat as tropical storm limits output, glut forecasts weigh
• Bigger trouble developing in China:

• China’s June exports, imports fall as trade war takes heavier toll
• China copper imports in June fall 27% from a year earlier
• China iron ore imports in June fall to lowest since Feb 2016
• China June soybean imports fall on trade war, deadly pig disease

Singapore’s decade-low growth triggers recession warning

Fed’s Evans: ‘A couple’ of rate cuts needed to boost inflation

Wall St. notches all-time highs on lingering rate-cut optimism

Elsewhere, Barry Ritholtz listed 6 positives and 6 negatives he found among the week’s major market and economy-related news. Barry also celebrated the fifth anniversary of his Bloomberg Radio Masters In Business – if you’ve been looking for a podcast focused on business and finance topics to tune in during your daily commute, do check it out!