San Francisco Fed President John Williams spoke after the closing bell last night. His remarks are putting some downward pressure on equity index futures markets this morning. He spoke of raising of raising the Fed Funds Rate sooner rather than later, which a serious case may be made for given the trail of supportive macro-economic results seen in key data-points on a multi-month basis now. His remarks came on top of a hawkish sounding William Dudley (NY Fed President), who spoke twice this week. Williams, though not a voting member of the FOMC this year, is considered part of Janet Yellen’s inner circle. He made one statement last night that lets you into what’s on his mind right now.
“If we wait until we see the whites of inflation’s eyes, we don’t just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark”. This one quote tells the trader that this central banker, who is neither a perma-dove, nor a perma-hawk is more afraid of inflation after many years of seeing very little of it, than he is of choking off growth after many years of seeing very little of it. This should, in my opinion concern any trader who’s current risk model is under-exposed to Financial names, or over-exposed to Utilities (really any dividend plays).
There may not be much going on today in the way of earnings, or macro. That did not stop European shares from moving lower today. Not only were the major continental indices led lower by downgrades and selling among auto manufacturers, but there are a couple of items to be cognizant of as you proceed. First, both Portugal, and Turkey are scheduled to have their credit ratings reviewed by Fitch today. I have not yet seen headlines on this. Obviously, the outcome of the Turkish review should be interesting. Secondly, Angela Merkel, Francois Hollande, and Matteo Renzi are scheduled to meet in Italy this weekend. Italian stocks were easily the worst performers in Europe today as they were led lower by their troubled banking sector.
It’s the weekend, gang. Stay hungry.
13:00 – Baker Hughes Rig Count (Weekly): Last Week 481 Total, 396 Oil. The growing number of Oil rigs is the number that traders are watching in this report. Last week’s 396 was a nice pop from the week prior’s 381, which in turn… was up from 374. In fact, the number of operating rigs involved in US oil production has been growing week after week. The price action seen over the last two weeks for WTI, and moves in the Energy sector indicate that this number is likely to stay on trend, at least in the medium-term.
Friday’s Earnings Highlights
Before the Open: BKE (.35), DE (.94), EL (.40), FL (.90), MSG (-.84)
After the Close: weekend stuff