Equities Move on Fed Commentary

Although off their Thursday lows, equity index prices closed lower yesterday. Investors digested a string of comments from our Federal Reserve as economic data supported their concerns.

Notably, St. Louis Fed President Bullard mentioned the current change in monetary policy has had little effects on the observed inflation to achieve the goals they have set out for themselves and the economy. Spooking market participants, he also mentioned he would expect a 5% to 7% federal funds rate would suffice in being restrictive enough to cool the high inflationary environment.

The CME FedWatch tool still reflects a forecasted 81% expectation that the Fed will break their 75-basis point streak and raise rates 50 basis points on December 14th.

Thursday, the 10-year Treasury Note yield notched 3.771% up 8.1 basis points.

Backing Bullard’s remarks, weekly jobless claims fell unexpectedly -4,000 to 222,000, showing a more resilient labor market. Expectations were weekly jobless claims to be 228,000.

U.S housing data also supported the Fed’s concerns, as October Housing Starts and Building Permits were stronger than expected. Housing Starts were estimated to be 1.41 million for October, but came in at 1.425 million, while Building Permits beat estimates of 1.514 million at 1.526 million.

Although equities were lower for most of yesterday’s session, a few big-name securities pushed higher. Earnings from Cisco Systems, Nvidia, and Macy’s all came in better than expected. Cicsco Systems (CSCO) closed up +4% after beating revenue estimates and raising forecasts, while Macy’s (M) closed up +15% yesterday after more than doubling EPS estimates.