Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Monday, Sept. 18.
State of Play
Stocks sold off again on Friday, giving back all the gains of the week and finishing in the red for the second straight week. Things have been pretty quiet since as we gear up for central bank interest rate decisions, key among them of course the US Federal Reserve. As of 0630 the bond market is the only place seeing any action:
Stock index futures are unchanged, with no major index moving more than 0.1% from the break-even point;
Commodities aren’t doing much either. Copper is flat. WTI crude oil is up 0.5% to trade around $90.50/barrel;
Bonds are selling off a bit, an indication of concern over Fed rate hikes. The 2-year yield is up 2 basis points to 5.06%. The 10-year is up 2bps to 4.34% (yields move inversely to prices).
Known Events
There’s little on the calendar today. The National Association of Home Builders published its Housing Market Index at 1000. A reading of 50 is expected, the same as last month. We also get the TIC (Treasury International Capital) Net Long-Term Transactions for July from the Treasury Department. Not sure why it takes Treasury six weeks to produce this data, but the consensus is for $117 billion worth of transactions, which is down from $196 billion seen the previous month.
The Bottom Line©️
The focus will be central banks this week. The FOMC starts its two-day meeting tomorrow, with the decision on interest rates, policy statement, and Powell press conference on Wednesday. There is an almost 0% chance the Fed adjusts its rate, at least according to futures traders, so the focus will be on the policy statement and interest rate projections for the rest of the year. We’ll discuss that more on Wednesday.
But the Fed is not the only game in town this week. Three other central bank majors make their interest policy decisions this week: The People’s Bank of China tomorrow, the Bank of England on Thursday, and Bank of Japan on Friday.
How disconcerting is the bond market sell-off we’re seeing this morning? It’s probably not quite significant enough to qualify as full-fledged fear. But it’s worth watching that space. Meanwhile, there are some signs of capitulation where tech stocks are concerned if you look for them.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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