Beyond Spook: Has US Market Started Healing?
I do not think the Fed could have anticipated the panic run in US stock market on the first 3 days of August trading.
Why ?
Reason being, when the FOMC meeting ended on 31 Jul 2024; followed by the afternoon press conference, the 3 Composite Indexes actually ended Wednesday trading higher.
August Chronicles.
On Thu, 01 Aug 2024 morning, when US weekly jobless claims report - (released before trading commenced at 9:30am) - recorded a spike in first time claims; panic surfaced, and the selloff began.
By the time Fri, 02 2024 arrived and (again) a weak July 2024’s Non Farm payroll was released by US Bureau of Labor Statistics also in the early mornings before trading- the weaker-than-expected data reinforced the downwards trend.
When trading resumed on Mon, 05 Aug 2024 the residual effect made one last effort to charge US market with negativity, causing it to plunge.
Catalysts.
Most media attributed the fall to:
Fears of a US recession as the main culprit for the global market meltdown after Friday’s disappointing July jobs report.
Investors were also concerned that the Federal is behind in cutting interest rates to bolster an economic slowdown, with the central bank choosing instead to keep rates at the highest in two decades.
If you asked me, seems like it due to “weak” reports - reported consecutively, that resulted in the panic run ?
I wonder which Wall Street institution/s seed the flame of panic and caused it to spread like a wild fire, that cannot be controlled and has to burn to the end?
Socialization In Full Swing.
In a bid to bring calm back into the market, Fed members have swung into full gear to socialize with the media. (see below)
On Mon, 05 Aug 2024, at a forum in Hawaii - San Francisco Fed member Mary Daly said:
She expects that interest rates will be cut later this year.
Policy adjustments will be necessary in the coming quarter.
How much and when it needs to take place, is going to depend a lot on the incoming information.
The Fed will do what it takes to ensure both of their goals of price stability and full employment would be achieved.
On the same day, 05 Aug 2024 - Chicago Fed member Goolsbee (on CNBC) also said:
The central bank would react to signs of weakness in the economy.
The interest rates could be too restrictive now.
Jobs numbers came in weaker than expected, but [are] not looking yet like recession.
On coming 08 Aug 2024, Richmond Fed member, Tom Barkin will also be socializing at the National Association for Business Economics.
It is not difficult to phantom what this Fed member will further say to fortify US market.
Quite certain there would be more socializations to come in the coming weeks.
CME Fedwatch Tool.
Post FOMC meeting and 05 August socialization by 2 Fed members, the CME Fedwatch tool has evolved too.
Probability of a -0.25% interest cut, has decreased from 86.5% to 36.5%.
Probability of a -0.50% interest cut, has risen from 13.5% to 63.5%.
How Effective?
Did the Fed’s effort make any inroads to restore calm in US market ? (see below)
Above is the charts of US 3 composite indexes - $DJIA(.DJI)$ , $S&P 500(.SPX)$ and $NASDAQ(.IXIC)$ from 01 Aug 2024 to 06 Aug 2024.
As said, US market was still consolidating on Monday, the day where both Fed presidents were making their rounds.
On Tue, 06 Aug 2024, US market seemed to have turned a corner and staged a partial recovery.
By the time trading called it a day:
And US market looks poised to continue its recovery on Wed, 07 Aug 2024. (see below)
My parting question - is it time to jump back into action or is it a smoke screen only ? Big Dilemna.
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Do you think US market has turned the corner and begin to recover ?
Do you think the Magnificent Seven will returned into pink of health soon ?
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Modify on 2024-08-07 22:05
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I’d say it will take more time to heal….
Yeah August is always bad in history
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