It’s All About Timing: Wall Street Halts Rally Ahead of Fed Minutes

Having posted a second straight all-time high yesterday, The Dow halted in futures trading overnight awaiting clues on the looming hike in base interest of the US Fed; rest of the world’s markets are following the trends set on Wall Street with all eyes on the Federal Reserve.

Kristian Rouz – After a second straight all-time record close on Tuesday in the Dow Jones Index, US stock futures took a pause just before the release of April’s US Fed policy meeting, likely bearing hints at the timing and scale of the anticipated hike in base interest rate.

Elsewhere in the world, Wednesday’s trading ended in the green, with Japanese shares hitting their 15-year highest. Commodities gained, driven by a resurgence in crude valuation on solid data from the Japanese economy, while the Eurozone’s investment appeal improved as a consequence of the right regulatory strategy and the rebound in economic growth, as the euro went down, boosting exporters.

Stock futures in the Dow Jones Industrial Avg Index were 0.13% up, to 18,296 points, thus extending Tuesday’s gains even beyond its fresh all-time highest. Futures in the S&P 500 edged 0.7% up, to 2,125.25 points, and the Nasdaq Index futures rose 0.11% to 4,506.50 points. The overnight dynamics on Wall Street suggest a sluggish expansion in the morning trading.

Fed minutes are expected to arrive at 2 PM, anytime before that markets will be flat, while the policy decisions will suggest further movements for the US and global markets.

What is known of the US Fed policy meeting that occurred on 29 April, is that the regulator revised downward its growth outlook, almost erasing expectations of the June rate hike to the markets’ cheering. Chances are higher now the era of the ultra-cheap credit money might be extended until at least September, however, today’s minutes will either confirm or rebuff such allegations.

Rate tightening is consensus-expected in September, and if confirmed by the Fed’s minutes, the markets will extend gains further. Any hint at sooner tightening will depress investors and traders greatly, with indices likely rolling off their fresh peaks.

Charles Evans, Chicago Fed President known as one of the most dovish policymakers, remarked yesterday the rate tightening might not come until early 2016, causing a roaring buyout on Wall Street. It is a possibility, however, that Evans’ projections only helped certain market participants to cash out of the bull market just before the sudden tightening, but we shan’t know before this afternoon.

The greenback rallied as well, while the European common currency retreated by 0.1435% down to $.1.1062. The dollar also surpassed its two-months highest against the yen, trading at 120.99 yen against the greenback. Both the European and Japanese exporters and stock markets gained in a stronger dollar environment.

Markets are also looking forward to this Friday’s speech by Janet Yellen, the Fed director, also for hints at tightening details.