JonesTrading’s Dave Lutz has the run down of what traders are chatting about right now:
Good Morning, and Happy Fed Day — announcement at 2pm (No presser), Street expecting dovish and will retain the ‘considerable time’ language. Right now futures are off slightly, led by a 25bp drop in Nasdaq as FB off 7%, GILD 2% on #s. EU Stocks remain near 3week highs and the DAX is adding 70bp, and volume slightly better, but still 10% light to recent averages as Financials still see selling pressure from stress tests, with SX7E on lows, off 1.4%. Over in Asia, Russia’s MICEX is up 70bp, despite the ruble falling to yet another low against the dollar – China popped 1.5% to 5week highs on reports the PBoC injected liquidity – Nikkei jumped 1.4% as Japanese IP came in better, and Aussie closes lower despite a bounce in the miners, as the big banks were under pressure.
The 10YY is off small in the USA — more telling is the continued tightening of PIIGS paper to Bunds. The DXY remains just below 4Y highs, rallying above Y108 (watch for gaps from stops above 108.4), but losing ground small against Euro (Positioning trimming into Fed). Looking at some metrics into the Fed — US 5Y Breakevens still around 3Y lows, and Fed Fund Futures remain at Dec ’15 for the 1st hike (Was Sept last meeting). We are finally seeing the Europeans and Asians buying Oil, with Brent and WTI up 1% into DOE inventories — More reports of heavy Chinese buying. Keep an eye on the worst energy commodity over the last week, Natty Gas, as contracts expire today, and reports are for possible snow this weekend in the Northeast (Crowded Short). Metals are mixed, and we continue to see the cover happening in Grains and Beans — both still very crowded shorts as well….
Scheduled catalysts include U.S. Housing Vacancies at 10, DOE data for Crude at 10:30, 1 $US15B 2Y floater auction at 11:30, a $US35B 5Y auction at 1, and the FOMC Rate Decision (No Presser) at 2. After the close, Brazil and New Zealand update interest rates. Some trades I’m watching for: DXJ/EWJ into Friday’s BOJ economic assessment — expected to downgrade economy, putting the next consumption tax hike at risk — Bullish, but starting to get crowded // EUFN probably getting a bit washed out – PIIGS paper tightening to Bunds shows the Credit Market not worried about systemic risk from Stress tests // Keep watching the cover in Oil Stocks (OIH, XOP and XLE) – Total, Statoil both disappointed, but shares in rally mode // Builders (ITB) keep making legs over 200dma, and nearing high end of its recent range.