05 Jun EQUITIES REBOUNDED SHARPLY ON COMMENTS FROM POWELL
As widely known, the Dow is down for six consecutive weeks. Will this week be the seventh? Bespoke Investment Group states that since 1900 there have only been seven 7-week losing streaks and just one 8-week losing streak.
The causes for the recent decline are well know; trade, economic activity, and now regulatory pressure.
Commenting about regulatory pressures, Citicorp wrote yesterday FAAG’s losses Monday eclipsed a $140 billion. In my view most have been narrowly focused on a few growth names, names that have dominated all upside in the markets at the expense of every other issue.
The question at hand has the illusion of remaining “safe places” been shattered?
Regulatory purview is not a short term affair. It lasts forever with an infinite number of outcomes.
In my view, the markets have never been this imbalanced, defined as so much money concentrated in a few names. An imbalance amplified by different trading technicals that emphasizes speed and cost of execution over liquidity and capitalization.
As stated above, equities staged a strong oversold rebound on the headlines that FRB Chair Powell would be receptive to an interest rate reduction if needed over trade. In my view, this statement is consistent with past statements as the Committee has repeated commented that any change in monetary policy will be dictated by economic activity.
I ask a rhetorical question. Will a 0.25% reduction really influence any spending decisions or is it just psychological?
Last night the foreign markets were up. London was up 0.46%, Paris up 0.61% and Frankfurt up 0.44%. China was down 0.03%, Japan up 1.80% and Hang Sang up 0.50%.
The Dow should open moderately higher on continued positive monetary policy sentiments The 10-year is up 3/32 to yield 2.12%.