We had the lowest volume of the year yesterday…as just 2.26bn shares exchanged hands in the composite volume…so there’s no question that investors are waiting to hear what the Fed has to say in their announcement and in Chairman Powell’s press conference tomorrow afternoon. That doesn’t mean we won’t get any movement today, but it should still be a quiet day in terms of activity.
The day before a Fed press conference (especially before a two-day meeting) tends to involve what has become known as “Fed creep”…as the stock market tends to creep higher on the day before those meetings. That doesn’t mean that the market always rallies after the meeting, but it usually helps the market move higher before hand. It could/should be an even bigger move this time…because ECB Chairman Mario Draghi made very dovish comments at their annual forum.
More specifically, he said that “additional stimulus will be required” if the economic outlooks does not improve….and that renewed asset purchases are an option…even if that means raising their self-imposed limits on how much they can buy. These comments have the yield on the German 10yr yield falling further into negative territory (-0.31% as we write)…and has caused European stocks to bounce nicely into positive territory. It also has the S&P futures trading 18 points higher in pre-market trading…so it certainly does look like we’re going to get some “Fed creep” today. On top of this, the yield on the U.S. 10yr note has fallen to its lowest level for this move at 2.022%.
If the global central banks act in a coordinated way, these kind of dovish comments bode well for some further dovish/bullish comments from Fed ...