I’m a fan of moseying.
Though, it drives most people mad.
My dogs and I go for meandering hikes each day.
They pick up the scent of deer, groundhogs, turkey, squirrels, fox, or a feral cat or two…
We discover a cool rock or stick…
We stumble across the leftovers from some animal’s recent meal…
There’s always some distraction to explore.
It’s directionless as we let the wind and the slope of the landscape dictate our path.
Well, today’s trading session took a similar, meandering path.
Equities struggled to gain traction in any real direction. Investors kept getting tripped up or distracted by various tidbits here and there.
But this is precisely the type of market we said to expect in this morning’s Pre-Market Prep.
The question now is…
What’s going to happen next?
Towing the Company Line
If you pull up a chart of today’s session of the Invesco QQQ ETF (QQQ), you couldn’t help but think investors looked lost.
Because they were.
There’s a lot to digest this week. But no conviction of where we’re actually heading.
The Nasdaq 100 proxy took the stairs down at the opening bell.
But our reversal took place precisely at one of the “6 Events… And Counting” we said would move markets this week.
At 10:00 AM ET, the Federal Reserve Vice Chair, Michael Barr, spoke.
“Inflation is still far too high. We’ve made a lot of progress in monetary policy, the work that we need to do, over the last year. I would say we’re close, but we still have a bit of work to do.”
This has been the company line from the Fed all year. And in turn, it was well-received by investors. Stocks rallied off their early morning lows into the green.
But then came the 11:00 AM ET hour… and speeches from two of the Fed’s hawks and doves.
As we warned this morning… if you love “Fed Speak,” this is your week!
Cleveland Fed president Loretta Mester stated, “In order to ensure inflation is on a sustainable and timely path back to 2%, my view is that the funds rate will need to move up somewhat further from its current level and then hold there as we accumulate more information on how the economy is evolving.”
That was echoed by San Francisco Fed president Mary Daly. She said, “We’re likely to need a couple more rate hikes over the course of this year to really bring inflation back into a path that’s along a sustainable 2% path.”
That a Fed hawk and dove basically repeated that same company line… that’s three-for-three on the day.
After these comments, the QQQ sagged. Too much of the Fed can be a bad thing.
Of course, the current outlook is that the U.S. central bank will raise rates to the 5.25% to 5.50% range. And the markets are currently pricing in a more than 90% chance the Fed will raise rates at the end of July.
So, did today’s speeches reveal anything new?
No.
That’s why, after hitting lows of the day to kickoff lunch, equities pushed higher. In the end, it was a long, meandering path to find ourselves fractionally further from where we were at the open.
Remember, we have a busy week ahead of us.
There are key data releases, including Consumer Price Index (which we cover in tomorrow morning’s Pre-Market Prep, so be on the lookout for that!) and Producer Price Index… as well as gobs more “Fed speak” before our blackout period starts Saturday.
But for now, it appears they’re going to be towing that tired, old company line… “We’re close, but there’s still more work to be done.”
With what’s ahead on the schedule this week, the market’s wild ride is only beginning. So strap in, keep calm, and stay tuned in to Pre-Market Prep and Last Looks for what to expect next.
Here’s to high returns,
Matthew
