Rates as of 0500 GMT
The theme of the day was riskoff as investors anticipated a worrisome US consumer price index CPI reading today see below. The SP 500 was down 1.8 at one point but managed to close down only 0.9, however the futures are indicating a lower opening today 0.4. The selloff was widespread, with 417 companies in the SP 500 and 22 of the 24 industry groups falling. Europe did even worse, with the STOXX 600 down 1.97 as 562 of its constituent companies falling.
There were several Fed speakers yesterday and they all said basically the same thing, which is basically the same thing theyve been saying for weeks, i.e. were not worried about a transitory increase in inflation and its way too early to start talking about tapering. Fed Gov. Brainard V said the US economy is on the road to recovery but still faces risks and its premature to discuss reducing monetary policy support. The relatively hawkish Philly Fed President Harker NV said that theres no reason to withdraw support yet. Presidents Bostic V, Mester NV, Daly V, and Bullard NV all said more or less the same thing; I wont bore you with the details.
These comments seem to be somewhat reassuring to the markets in that they clearly indicate that the Fed isnt thinking of tightening right now, but then you run the risk of the other problem, namely the dreaded behindthecurve syndrome. If suddenly they wake up one day to find inflation stable at 5, what would happen then? Bam!
On the other hand,…