Market Alert - Pre-Market

Futures vs FV: SP 4.89; DJ +54.04; NASDAQ +18.63

Things are not so quiet ahead of the FOMC announcement this afternoon. Futures are higher, gapping upside in the overnight session, aided by some good company specific news on earnings and company buys. Over teh past 2 hours some gains have eroded but they still sport good gains heading toward the open.

Things are apparently all well according to CNBC given some big companies are reporting earnings beats: ADBE, FDX, KBH, GIS.

BUT, those earnings from huge companies do not tell the story of the US. The Gallup surveys provide a completely different picture. The middle class invisible and for some reason silent decimation as adults who were in the middle class lost their jobs, and even though they got another full-time job the pay is half of what they made before. They are 'fully employed' in the BLS' report but they have suffered personal economic collapse. On top of that, the percentage of full time workers in the US is just 48%, the lowest since early 1983 as the US emerged from a recession as bad as the great recession. Multiply the plight of the struggling former middle class worker by millions and you see why the US wealth has made a dramatic shift and why so many are suffering in the 'wonderful' US economy that is producing 1% GDP growth.

No wonder as company destruction moved ahead of company creation in 2008, now averaging -30K businesses per year versus averaging +120K new businesses per year for the prior 30 years.

Ah, what a lead in to the FOMC trying to decide whether to raise rates. The irony is, if it kept rates low for the above reasons it would still be the wrong thing to do because low rates are part of the overall policy problem that is causing such economic hardship in such a 'wonderful' economy.

Japan: BIG NEWS. Changed its stimulus. No change on rates but increased ETF purchases AND bond yield curve controls. Japan is attempting to force the yield curve to steepen. As with all artificial means, however, it does not solve the problem. Japan's problem is a lack of growth. Low rates have not helped. Buying bonds has not helped. Buying equities has not helped. It needs to go full capitalist and let the money go where it needs to go. As the US is Japan now, the US needs to do the same.

Oil: Up after API showed -7.5M bbl

Mortgages: -7.3% on the week. Higher rates blamed.

Fed: Larry Summers tweets 11 reasons the Fed should not raise rates. Ironically, 'not to hurt democrat chances in the November election' was not one of them.


OTHER MARKETS
Bonds: 1.686% vs 1.693% 10 year

EUR/USD: 1.1147 vs 1.1157

USD/JPY: 100.86 vs 101.729

Oil: 44.85, +0.80

Gold: 1332.40, +14.20


Futures have firmed from their slide toward the open, and as such futures hold a pretty decent level heading toward the bell. Stocks will start higher, may struggle some to hold the move -- that happened Monday and Tuesday.

May. The widely held belief is the Fed does nothing, and thus there may be short covering ahead of the FOMC result. SP500, DJ30, SP400 are down over the past 2 weeks, after all.

Trading around the FOMC, before and immediately after, is tough. A lot of the trade is hedge driven, and thus when the news comes out there can be wide volatility before the trend settles in. It should be upside given the Fed likely does nothing, but it could take some gyrations getting there. Of course maybe this is the inflection point where Fed largesse is no longer rewarded? Looking at Japan, the answer would have to be, for the moment, 'Nah.'

We will try to play as loosely as possible this morning, watching the downside plays and how they are acting. MSFT is up because of its $40B stock buyback, no doubt using a lot of its recent bond offering cash to BUY those shares back. Wow, what great use of a bond offering! Watching MSFT as it could be a leading market indicator given it has good news. If it is a ho-hum session or even fades, that is telling.

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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