The Fed Minutes Pushed the Stock Market UP...then DOWN
While following daily gyrations in the stock market isn't a habit, it's sometimes fun to watch what happens when the Fed reports on the minutes of its latest meeting. Today was a an example of this.
The "logic" going into today was: If they call for 4 interest rate hikes this year, it'll be "hawkish" and probably negative for stocks. If they call for 3, it's be "dovish" and stocks will rejoice.
So what did they do? They went dovish. Stocks rejoiced. For a while it looked like the party was going in earnest until...stocks turned down. From a high of 2746, the S&P ended the day at 2701, a drop of over 40 points.
What happened to the "logic"? Who knows. Maybe when the day began and stocks trudged up, there was some anticipation of a dovish stance. And so when the news arrived, having already priced in the dovish announcement, stocks simply sold off. But that would only make sense if prices turned down after the announcement. They didn't. In fact they rose in earnest.
Then again, since daily trading is so dominated by high frequency traders and their computer-driven models, prices don't necessarily respond to human beings thinking and feeling a certain way - at least not instantly. Maybe the models had their say, with human beings joining the party late.
Which all boils down to, "Who really knows?"
Of course, we could look back at our last post and say that stocks will indeed test their recent lows, as we thought they might. It didn't look that way during most of the day today, with prices grinding higher. But by the end of the day, it looked that way.
For now, we wait until tomorrow to see if the testing of lows thing really comes to pass. Maybe it will, maybe it won't. Maybe by tomorrow, traders will change their minds and bid prices up again. It's called volatility and it's not like we've not seen some of that lately.
The "logic" going into today was: If they call for 4 interest rate hikes this year, it'll be "hawkish" and probably negative for stocks. If they call for 3, it's be "dovish" and stocks will rejoice.
So what did they do? They went dovish. Stocks rejoiced. For a while it looked like the party was going in earnest until...stocks turned down. From a high of 2746, the S&P ended the day at 2701, a drop of over 40 points.
What happened to the "logic"? Who knows. Maybe when the day began and stocks trudged up, there was some anticipation of a dovish stance. And so when the news arrived, having already priced in the dovish announcement, stocks simply sold off. But that would only make sense if prices turned down after the announcement. They didn't. In fact they rose in earnest.
Then again, since daily trading is so dominated by high frequency traders and their computer-driven models, prices don't necessarily respond to human beings thinking and feeling a certain way - at least not instantly. Maybe the models had their say, with human beings joining the party late.
Which all boils down to, "Who really knows?"
Of course, we could look back at our last post and say that stocks will indeed test their recent lows, as we thought they might. It didn't look that way during most of the day today, with prices grinding higher. But by the end of the day, it looked that way.
For now, we wait until tomorrow to see if the testing of lows thing really comes to pass. Maybe it will, maybe it won't. Maybe by tomorrow, traders will change their minds and bid prices up again. It's called volatility and it's not like we've not seen some of that lately.
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