Philly Cheesesteak Indigestion

Equities start the day lower as we digest a sloppy Philly Cheesesteak and a Fed meeting that has super smart people scratching their heads. Philly Fed came out this morning and had its biggest miss relative to expectations since August 2011 and its 7th biggest miss since 1998. Yikes…not only did headline miss but the new orders component absolutely threw up on itself falling into negative territory for the first time in nearly 3 years. Now look, I’m not going to make some broad sweeping conclusion based on a survey from a city that boos Santa Claus but it’s clear that economic activity bears monitoring right now. Yesterday Powell and his gang put out the minutes of their January meeting and basically were concerned enough about how things were going to shift into a far more patient stance. You know what’s crazy? They actually wondered if their own communications were one of the causes of financial market volatility!! "A variety of factors—including FOMC communications, weaker-than-expected data, trade policy uncertainties, the partial federal government shutdown, and concerns about the outlook for corporate earnings—were cited by market participants as contributing to a deterioration in risk sentiment early in the period.." Can you imagine Powell sitting at the end of some $10,000 mahogany table saying “Umm, guys, every time we say something the market acts like we’re buying puts so yea let’s rethink this whole tone we are projecting”. Check out my guy Tim Duy’s take on this but I wonder…do they seem all over the place right now? They’ve shifted to being patient because the data (and the market) demands it but what happens if growth accelerates this year? Not only are the talking dovish on rates but they are talking about ending the reduction of their balance sheet and what the heck to do with their dot plot!  Will they have to walk all of this back if Europe comes out of its malaise and we make a broad sweeping trade deal with China? Fascinating times my friends, stay tuned to the Bull and Baird blog for endless updates on Fed policy, what movie should win Best Picture (Bohemian R) and gif recipes for weekend snacking!!

After the open…well…no joke nothing really happened. Halfway thru the day I wondered on TWTR whether they had even opened the market yet. Is that a bad thing? Probably not, there’s no doubt we could use about a week or two of sideways so people will stop talking about how crazy the bounce is. So instead of writing 500 words about a terribly dull morning let’s look at this chart and jump to some kind of conclusion. What you are looking at is a chart by the good people of NDR showing 4 week equity fund flows vs the S&P500. What are you also looking at is what we who have spent our lives as traders call “people puking up stocks”. I mean not only puking up stocks but a historic amount of puke, like eating $20 of taco bell and drinking a bottle of Everclear puke (isn’t it crazy that $20 goes so far at Tbell? That’s like most of their menu at once). So…I wonder….do we think those people have jumped back in? Probably not right? It’s been a little over a month and a half since that happened and you have to think they are stubbornly “waiting for a pullback”. So what happens if we break 2,800 and put new highs in our sights? Yep, that’s right, they’ll come back in droves after selling the lows of last December. You know who can help you avoid stuff like this? Advisors, especially the awesome one’s we have here at Baird. Holler at me if you need someone to talk to. By lunch it was like we were stuck in molasses. 2,780 down 0.16%

We saw a small selloff in the afternoon and a close at 2,774 down 0.35% but let’s not make a mountain out of a molehill, there was also a last minute buying surge. Today was mostly about weak economic but yea, I mean we know growth is slowing. Q4 Atlanta Fed is 1.4% and if you check my links below you’ll see an article about Leading Indicators potentially having peaked (for now). As always it boils down to “what’s priced in” and we’re still trying to figure that out. But what if I told you Copper is perking up and Europe is perking up (h/t @williedelwiche for pointing out MSCI Europe is near a breadth thrust) would that, plus all those people who have probably been sitting out of the market since last Dec, interest you? It should… 

Final Score:  Dow -39bps, S&P500 -35bps, Nasdaq -39bps, Rus2k -39bps (what was up with 39 today?)

News Highlights:

I have two skiing videos for you tonight! It’s been way too long and I love skiing so let’s check these out

  1.  Have you ever wanted to know how a video ends more than this?
  2.  Ever seen someone ski on a 60 degree slope? Now you have. This is absolutely unbelievable

Have a good night