Stocks saw a rather mixed session on Tuesday seeing turbulence as investors took into account recent remarks by the Federal Reserve and are considering whether or not the Fed would unwind plans to shift policy in a more dovish direction.
With the recent comments made by the Fed, we saw the S&P500 rise 0.13% at close of market, which after a session mostly trading in the red was good news. The Dow saw a third straight trading session fall ending trading down 0.08% which were led by declines of 3M which saw losses of over 2%. The NASDAQ saw gains in the session rising 0.54% closing up 43.35 points.
Stocks on their own saw struggles in Tuesdays trading, seemingly unable to turn higher as markets continued to prospect the possible changes in prices that the Fed Committee decision may show, if they do move ahead shifting the monetary policy to a less accommodative direction in the midst of strong economic data. On Tuesday afternoon, markets priced in a 3.8% probability on a 50 basis point rate cut, after the Feds July meeting, this paired with a 96.2% chance of a less aggressive 25 base point ease.

Jerome Powell, the chair for the Fed made comments at the Federal Reserve Bank of Boston on Tuesday morning, in what is set to be his last public appearance before he issues his bi annual monetary policy report to congress on Wednesday and Thursday. In his comments which were more focused on the topic of bank stress testing, Powell made comments that the assessment procedure will have to be evolved over the next few years, so they can keep in line with the constantly changing financial system. This will enable the Fed to test that banks will be able to continue to run as normal in the case of sever economic downturn.

Treasuries saw losses across the curve on Tuesday before the start of Powell’s meeting coming on Wednesday. The yield on the ten year note, which moves inversely to the price, rose over 2.5 basis points to a respectable 2.063%. Depending on how the Fed tackles the next few days, and what comes from the reports, may show even more volatility in the markets.

Sally Dawes – Bennet International