Release Of Fed Minutes Brings Mixed Response In Gold And US Equities

It’s not unusual to get a bit of a whipsaw effect on the day of the release of minutes from the Federal Open Market Committee meeting. Many who were betting one way or another suddenly shift to the diametrically opposite positions. And then they possibly shift back as volatility increases and traders take advantage. (Think of a football team’s offense shifting, then coming “set,” before the play actually begins.)

Our overall impression of the minutes’ message is that not a whole lot has changed, although there is a very slight whiff of optimism that could begin the tectonic shift toward an interest rate hike.

Here are a few salient paragraphs from the minutes of the FOMC’s July meeting:

Consumer price inflation continued to run below the Committee’s longer-run objective of 2 percent, restrained in part by earlier decreases in energy prices and in prices of non-energy imports. Most survey-based measures of longer-run inflation expectations were little changed, on balance, while market-based measures of inflation compensation remained low.

Total nonfarm payroll employment increased briskly in June, but the increase for the second quarter as a whole was noticeably slower than in the first quarter.

Manufacturing production was little changed, on balance, in May and June, and mining output edged up following a string of steep declines. Automakers’ assembly schedules pointed to an increase in motor vehicle production during the third quarter, but other indicators of manufacturing production, such as new orders diffusion indexes from national and regional manufacturing surveys, suggested only modest gains in factory output over the next few months.

Growth in real personal consumption expenditures (PCE) appeared to have picked up in the second quarter. The components of the nominal retail sales data used by the Bureau of Economic Analysis to construct its estimate of PCE continued to rise at a solid pace in June. Although sales of light motor vehicles declined in June, the average pace for the second quarter as a whole was essentially the same as in the first quarter. The apparent pickup in real PCE growth was consistent with recent readings on key factors that influence consumer spending, including continued gains in real disposable personal income and in households’ net worth. Also, consumer sentiment as measured by the University of Michigan Surveys of Consumers remained reasonably upbeat in the second quarter and in early July.

To summarize the Fed’s assessment of disparate sectors of the credit markets, it’s safe to say that commercial and consumer borrows, small and large lenders and entities tapping credit markets through bonds (and other kinds of paper), experienced and will still experience very accommodative conditions.

Read the full pdf of the minutes on the Fed’s website HERE.

Correlating the data cited by the Fed and its effects upon specific markets is tricky on day one of the release of the minutes. Markets are more or less expressing that sentiment by keeping the status quo.

At 4PM in New York, gold is up marginally, not even enough to ponder (till tomorrow).

U.S. equities are slightly up. Oil is up but mostly on dollar weakness/euro strength. True fundamentals balanced each other off. We saw a bigger-than-anticipated U.S. draw-down but the Saudis are still pumping at record volume.

Of course, U.S. 10-year bond yields are lower, sitting just under 1.56%.

Wishing you as always, good trading,