1/27/2000
While I’ve noted one credible strategist who attributes the past two-day selloff to deteriorating economic forces and threatening technicals, while I sympathize, I completely disagree. I’m with the overwhelming consensus that says the catalyst was the coronavirus, with the technicals playing a role in terms of the speed of yesterday’s decline in particular.
Amid anything but good news on the virus, futures, pre-market, are nonetheless trading up notably (+.61%) this morning.
Clearly, the bulls are betting that the Fed comes to the rescue — or at least won’t upset the apple cart — in their wrap to this month’s policy meeting tomorrow. While fed funds futures are pricing in zero chance of a cut this week, odds of cuts later in the year are on the rise. This, plus the Fed’s willingness to inject liquidity come hell or high water has the bulls feeling very sanguine for now.
Thursday’s US Q4 GDP number will be intensely in focus. The Atlanta Fed’s nowcast predicts 1.8%, the NY Fed’s predicts 1.2%, and Hedgeye’s comes in at 0.3%. Obviously, if Hedgeye has it right the market will react. The consensus among economists is 2.1%.