FRB Chair Powell’s comments were largely a non-event. Powell stated, “more good data” would strengthen confidence that inflation is moving toward the central banks 2% target and “recent readings point to modest further progress on prices.”
The Fed Chief further stated that lowering interest rates too little or too late could put the economy and the labor market at risk Conversely he remarked “cutting rates too soon or too much could stall or reverse inflation progress.”
Powell reinforced the notion that the next move in Fed Funds will be down but did not elaborate as to when. The markets are suggesting a 75% chance, the first reduction may be in September and by 49 bps by year end.
Markets were generally unfazed by his remarks.
Few would debate the narrowness of the market. The S & P 500 is up about 17% this year and Bloomberg writes this is about 75% of this advance is the result of six names: NVDA, MSFT, GOOG, AMZN, META and AAPL.
The momentum in these six names is unprecedented, the result of algorithmic and momentum-based trading amplified by indexing where price discovery is not a factor.
An equal weighted version of the S & P 500 is up just 3.7% this year as the mega capitalized names as trouncing all others by a historic margin.
Second quarter earnings season is about to commence. It is also largely accepted that if earnings continue to accelerate in the names minus the big six, the advance should broaden out, with perhaps the indices marking time as monies gravitate into the 494 other names of the S & P 500.
Last night the foreign markets were mixed. London was up 0.60%, Paris up 0.68% and Frankfurt up 0.61%. China was down 0.68%, Japan up 0.61% and Hang Seng down 0.29%.
Futures are little changed. The 10-year is up 6/32 to yield 4.28%.
