Futures vs FV: SP -15.10; DJ -111.91; NASDAQ -36.65
Futures are heading even lower toward the open as all news is bad news to start Friday.
Futures were sluggish and lower earl in the morning but really got ugly when FOMC voting member Rosengren, reputedly a dove, gave comments apparently pressing for a rate hike, noting that prolonged low rates can cause excessive inflation and ultimately hurt the recovery. You know, when I first read the headlines I thought that possibly an FOMC member finally got it about these low rates. Sadly, no, he was just spouting the usual Keynesian crapola, shooting theory from the hip. As we have seen, sanity only seems to take hold for FOMC members and presidents AFTER they leave the Fed and are no longer under the orders to speak naught ugly against the institution.
Surprisingly, even banks are under pressure this morning even though rate hike odds are going up. If the Fed is going to hike twice as Fischer said, then it has to hike in September. Oh well.
Perhaps WFC's $185M fine for creating 2M unauthorized accounts for clients involving at least 5300 (now fired) employees has something to do with the financials trading lower. After all, Wells was supposedly the angelic of the big banks; if it is a typical bank then just how bad is it with respect to the other less 'reputable' banks? Of course I have zero respect for Wells and in hindsight you can see this as a logical result. Why? Because its CEO used to go onto the financial stations and spout how WFC was lending to small businesses, was their friend, etc., when in the real world it was the exact opposite. I know loan officers whose orders were NOT to lend to small businesses but to instead focus on their high wealth clients. All small businesses were to be referred to the SBA first for loans. They also said there was a lot of pressure to get new clients; for years WFC tried to get me to open more and more accounts for businesses 'to better service my needs.' With fees? But, I digress. It just all makes sad sense doesn't it, and you wonder where everything else is going.
M&A: EPD pulls bid for WMB
Earnings beats: FNSR (and increased guidance); RH; ZUMZ (but says business is still slow)
Misses: KR (TL); FIRM; KORN
Oil: After the Thursday surge, oil trades lower. That can be expected after such a huge surge, but there are reasons pinned on today's weakness, e.g. any freeze deal hitting a snag (imagine that) as Iran, Libya, Nigeria demand the right to increase production.
North Korea: Confirms it tested a big nuke that caused a 5.3 earthquake. President Obama says the nuke test will have "serious consequences." Now that the laughter has died down, you have to ask 'consequences for who?' Is this another 'red line in the sand?' It does not take much of a sage to predict this problem will be pushed off to the next President. That is the fate of a lame duck.
OTHER MARKETS
Bonds: 1.659% versus 1.61%. Wow bonds are plunging the past 2 sessions as that market suddenly steepens the curve in anticipation of a rate hike.
EUR/USD: 1.1249 vs 1.1269
USD/JPY: 102.82 vs 102.384
Oil: 46.80, -0.82
Gold: 1338.30, -3.30
Futures are flopping around at the lows of the session as stocks are ready for a dive at the open. Higher interest rates are a worry, bank scandals are a worry, everything is a worry today.
Okay, if all is a worry we will do what we have done and protect our capital; glad we were closing positions as they started to struggle and closed several Thursday. Futures have stabilized the past hour so of course after the gaps lower you watch to see if that is the extent of the damage. Many times it is as the pre-market has had plenty of time to digest the morning data and prices it in at the open. If so, we let them bounce, see what still looks good, see what is damaged goods.
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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