The Fed's Motto Is "Do Whatever It Takes"

FOMC is expected to leave policy unchanged
Congress needs to bridge the divide between the Republican and Democratic proposals
USD reserve currency status is at risk
Stock Market Update for Traders

Stock Market Update for Traders

Tuesday's Close

E-mini S&P 500 (September): Settled at 3213, down 19.25

E-mini Nasdaq-100 (September): Settled at 10,540, down 135.25

It's Fed Day and the FOMC is expected to leave policy unchanged. The statement is released at 1:00 p.m. CT. and Fed Chair Jerome Powell’s press conference begins 30 minutes later. We'll be looking for any signal the committee is willing to waiver from their current path, which holds rates steady at zero through August 2022 and allows their balance sheet to balloon above $9 trillion. In the end, markets will be looking for Powell to reaffirm the Fed’s “do whatever it takes” narrative in order to bring the U.S. economy back from the depths of the pandemic. 

Powell will also reemphasize the need for additional fiscal measures. Congress is attempting to hash out their differences and bridge the divide between the Republican’s $1 trillion plan and the Democrat’s $3.5 trillion plan. Furthermore, the Republican’s must now gain support from the more fiscally conservative corner of the party. The clock is ticking as current stimulus measures are set to be exhausted and Congress’ recess is scheduled to begin August 7. 

Unprecedented stimulus measures, both monetary and fiscal, have burned the U.S. dollar to the ground and put its reserve currency status at risk. It has also paved the way for a historic stock market rally. The Fed certainly has a balancing act to perform, but in our opinion supporting the U.S. dollar must not be overlooked. We would expect Powell to field questions on the dollar’s demise and this could become an inflection point within the Fed’s policy stance. 

There is even more in Washington today as the CEOs of tech behemoths Apple, Amazon, Alphabet and Facebook appear before the House of Representatives antitrust subcommittee. Much of the House panel will look to posturize. Although we don't expect to hear anything substantial, developments could set the stage for a battle after November elections. The big 5 tech companies (including Microsoft) account for 1/4 of the S&P 500 Index’s market cap. 

We are in the heart of earnings season and Facebook reports after the bell today. We look to Apple, Amazon, and Alphabet tomorrow. Boeing, GE, and GM are among a slew of companies reporting this morning and all three have all moved upward after mixed reports.

Interested in our technical perspective? Please sign up to have Blue Line Futures technical outlook, actionable bias, and proprietary levels emailed to you each day.

 

 

About the Author

Blue Line Futures, is a leading futures and commodities brokerage firm offering discounted personalized service and futures and commodity research.