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. 11.
State of Play
Some fresh clues of a more dovish Federal Reserve emerged over the weekend. China loan data overnight showed new loans growing ahead of forecasts, an indication the country is indeed taking necessary steps to help borrowers and ward off deflation. Markets liked these developments and as of 0620 we are looking at some risk-on:
Stock index futures in the US are pointing to gains, led by the Nasdaq and small caps up 0.5% each. S&P 500 futures are up 0.4%;
Copper is gaining ground, presumably on the China news, with prices up 1.5%. WTI crude oil is down 0.5% to trade around $87/barrel;
Bonds are unchanged. The 2-year is 4.99%. The 10-year 4.29%.
Known Events
Earnings today: Oracle (ORCL 0.00%↑ ) and Casey’s General Stores (CASY 0.00%↑) report after the close at 1600.
That’s all we got for today. A slow day, but don’t get too comfortable.
The Bottom Line©️
An important update on the Fed’s thinking came out over the weekend courtesy of the Wall Street Journal — the one media outlet that does appear to have genuine insight into the Fed’s thinking, if only because it is the Fed’s preferred method of leaking information. The gist of it is that the Fed may be done with rate hikes, or at least the most draconian part of rate hikes. This is the elusive Fed pivot we’ve been looking for. If you’re keeping score at home, it’s about the third or fourth time we’re dealing with expectations of a Fed pivot.
That aside, data can still trump any Fed thinking. We get a fresh inflation reading with the CPI on Wednesday. If that comes in hot it could (should) change the Fed’s thinking on this dovish tilt. Whether it moves the Fed to act at its next meeting on Sept. 20 is another question. Fed fund futures are still pricing in a 93% chance of a pause. It may be that this month’s meeting is decided, as indicated not just by the WSJ story but also Fed speakers, so the November meeting will move into focus. Just 42% of traders are even pricing in a rate hike at that meeting right now.
Where this all leaves markets is with some renewed hope-ium, at least until Wednesday.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Fed Pivot Hope-ium, China Loan Growth