Thursday, March 20, 2014
The stock market today will reflect more follow-through from
the Fed announcement. Pre-open sentiment is modestly in the
negative, but we will see if the traders' response today will be
different from their immediate reaction yesterday. The Fed didn't
really move the goal post much, but the overall perception in the
market is that the incremental change is in a more hawkish
The official post-meeting statement committed to keeping
interest rates low for a 'considerable period' after the QE
program had ended. But the Chairwoman's definition of
'considerable period' is no longer than six months. What this
means is that if the QE program concludes by the end of this year
as currently envisaged, then interest rate increases could start
sometime in mid-2015. This isn't materially different from
consensus expectations ahead of the Fed announcement, but it is
just a tad bit shorter timeline.
In addition to the Chairwoman's six-month comment, the
committee's economic projections were also a bit disconcerting,
particularly relative to their December projections. They now see
a modestly lower path for GDP growth, expect the unemployment
rate to drop more, see inflation rising a bit faster and,
importantly, see a quicker start to rate increases.
These projections seem to indicate that in the structural vs.
cyclical debate about nature of slack in the economy, the FOMC
has started leaning towards the former; meaning that labor market
slack could diminish and pricing pressures start showing up even
at a lower growth pace.
On the earnings front, we got better-than-expected results
) this morning, which follows strong results from fellow
) on Wednesday.
) also came with an EPS beat on in-line revenues this morning,
) reports after the close today.
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