Taper ‘Tantrum-ette’ – Stocks Pump’n’Dump As Fed ‘Eases’ Balance-Sheet Pressure

Powell to traders today…

h/t @ForexLive

The bigger than expected QT taper announcement juiced markets (stocks and bond prices up, dollar down) into Powell’s press conference, then got spooked lower as he admitted “inflation has shown a lack of further progress… and gaining confidence to cut will take longer than thought.”

But that dip didn’t last long and yields puked, stocks soared, gold rallied and the dollar puked…

Source: Bloomberg

The market shrugged off Powell’s comments about “whether rates are at their peak will depend on data” which opened up the path of possible rate-hikes, but he dd add that “he doubts next move will be a hike.”

CNBC’s Steve Liesman asked the big question that everyone should be asking: you are ‘sort of easing’ by reducing QT while holding rates flat because you’re not confident that inflation is under control – wassup with dat?

Powell replied with some words that meant nothing, stating that they have long planned on tapering QT and claimed that ‘reduction in balance sheet run-off is not policy-easing’.

“This is not the easing you’re looking for…”

By the close, all of Powell’s pig-kissing lipstick had been wiped off (see below for the coordinated crypto/nasdaq take-down) as stocks saw solid gains erased in the hour after Powell stopped speaking… Small Caps and The Dow managed to hold on to the gains but Nasdaq and S&P closed nearer the day’s lows…

‘Most Shorted’ stocks saw a massive squeeze (+5%) on the FOMC headlines, before the late day selling pressure hit…

Source: Bloomberg

MAG7 stocks ended the day unchanged after giving back their post-Powell gains…

Source: Bloomberg

Treasury yields plunged 6-8bps across the curve on the day, with the short-end outperforming, dragging all yields lower on the week…

Source: Bloomberg

The 2Y Yield snapped back below 5.00% once again…

Source: Bloomberg

The yield curve (2s30s) jerked flatter initially, then steepened dramatically back to flat on the week…

Source: Bloomberg

The dollar tumbled on the non-easing ‘easing’ (but bounced back a bit after Powell finished speaking)…

Source: Bloomberg

Gold surged back above $2300 on the non-easing…

Source: Bloomberg

Bitcoin bounced back on the FOMC statement, recovering some of last night’s bloodbathery, but somebody did not want it back to $60,000 and that smackdown dragged stocks down with it…

Source: Bloomberg

Oil prices ignored all the fuss around The Fed and fell for the third day in a row (its biggest daily drop since early Jan) with WTI back below $80 at six-week lows…

Source: Bloomberg

Finally, rate-cut expectations (hawkishly) rose on the day with one-or-two cuts in 2024 now 50-50 and two-or-three cuts more in 2025 around 50-50 also…

Source: Bloomberg

And, also Powell explained that he “doesn’t see the stag or the ‘flation” in markets… well this should help Jay…

Source: Bloomberg

We can’t help but feel like Powell is awfully eager to ‘loosen’ policy… but he made it clear that the 2024 election “just isn’t a part of the Fed’s thinking.”

So, that’s that then!