Via Dave Lutz at JonesTrading, here’s a quick guide to what traders are saying the morning after the Fed’s big meeting.
Good Morning, and Happy Friday! Today brings us September “Quadruple Witching” options Expiry Day, so be watchful for explosive volume and tractor beams towards big strikes. It’s a sea of red over in Europe, as investors flood back into the credit market — Bund yields are down to week’s lows, and Several Asian Sovs are seeing some of the biggest drops in yields this year — Aussie, Kiwis, Japanese, Indonesia, etc. Practically every sector is seeing heavy selling in Frankfurt, with the big financials taking the brunt of the weight. In London, the Miners weighing on FTSE with Glencore off 4%. Over in Asia, aside from Tokyo the markets welcomed the Fed’s decision. Shanghai managed to close the week green, Korea popped 1%, Aussie added 50bp — and most EM markets closed unch. The big loser was Japan – Nikkei was hit for 2%, led by exporters as the Yen soared against the $US. Japanese markets are closed until next Thursday for Holidays. Reminder that many popular ETFs, including SPY and QQQ, go ex-divvy today
That US 10YY continues to grind lower, now under 2.15% with eyes on the 200dma for support at 2.12% – as the 10YY makes fresher lows, CTAs will be rebalancing further away from equities. Fed Funds continue to trend dovish as well, with only a 18% chance of an October lift, and on balance not pricing in a liftoff until Q1. Further buying in the front-end is pressuring that 2YY off another 2bp, and the yield curve is flattening sharply again — Financials in store for another very sloppy day if this persists. The DXY is trying to rally from 3week lows near 94 — Euro is reversing on dovish commentary — but that Aussie $US is flying again, taking out yesterday’s flash spike on the FOMC — That bodes well for base metals, and we have Gold up 1.5% and nearing key resistance. The energy complex is seeing some more profit-taking from the recent spike, with WTI off 1% into the Baker Hughes Rig Count later today
While Options Expiry will be setting the early tone, we do get US Leading Index at 10 — and the US Treasury is auctioning off Inflation-Protected securities at 11:30 (interesting in light of Fed comments on Inflation) — We get “Household Change in Net Worth” at 12. That Baker Hughes Rig Count hits at 1pm — just ahead of 2 FOMC speakers: San Francisco Fed’s John Williams Speaks in New York at 1:30, and Fed’s Bullard Speaks on U.S. Economy, Banking in Nashville at 3:30 — right when the CFTC “Commitment of Traders” data hits. Looks pretty quiet down in Washington as Congressmen flush toward Reagan National and Lobbyists find their way to Old Ebbitt.
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