Wednesday's Close

E-mini S&P 500 (September): Settled at 4384, up 40.75

E-mini Nasdaq-100 (September): Settled at 15,163.50, up 139.50

The Federal Reserve threaded the needle perfectly yesterday by not surprising markets. They didn’t announce a taper and, given recent events, the market didn’t want such an outcome. However, the market didn’t want the bank to recede from its current path, either, buckling at the first sign of minor turbulence. 

Powell and committee emphasized conditions to taper their monthly asset purchases are near, but most importantly continued to disassociate those conditions from that of a rate hike. Furthermore, they lowered their growth forecast this year while increasing it slightly for the next 2 years. They also raised their inflation expectation slightly this year to 3.7% from 3% but signaled their expectation for it to fall back in line with their longer-term 2% target over the next 2 years. 

In the aftermath, U.S. equity markets traded strongly, while Treasuries were stable and the U.S. Dollar gained slightly.

Strength across equities continued overnight and all 4 major U.S. benchmarks traded into positive territory on the week. Hong Kong came out of holiday today and led markets overnight, gaining 1.2% after being closed during the Tuesday night reversal. 

The strength continued into early this morning and U.S. benchmarks slipped from strong technical resistance amid a deluge of news. China was said to tell local governments to prepare for Evergrande’s eventual failure. Also, September Flash PMIs from the Eurozone came in below expectations. Within the same hour, the ECB said sticky inflation may force an end to PEPP as early as March. The U.S. Dollar and yields have since strengthened.

U.S. Jobless Claims unexpectedly rose for the second week in a row. We received U.S. Flash PMIs at 8:45 a.m. CT.

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