Jerome Powell told us they need to see progress towards 2%. Unclear whether that is 2.1% or 2.7%. Since we've been declining, are we on the path, or does he need the path to be faster?
If you are falling into the Atlanta GDPNow camp, or sticky inflation, I could see a hawkish take on this. He definitely sounded worried about inflation not coming down. On other hand, what else was he going to say? If he was trying to jawbone the market, then he said the bare minimum to jawbone the market. If you think the data will be neutral or even mixed, and not super strong, then this seemed pretty darn dovish to me. The FOMC already "paused" once. No reason they won't pause again and again.
If the CTA/Quant/Systemic traders are short treasuries - and there is evidence they are - then they can lean on treasury prices, pushing yields higher, as it is a Friday in August and long bonds have not worked recently. But I think this is last gasp and want to but bonds, across the curve, which makes me mildly bullish on equities.
We learned China is trying to do some stimulus, but either doesn't see the magnitude of the issue, the contagion risk, or they just don't want to stimulate. I suspect it is the former and we will get something more substantial after the BRIC summit
We learned AI spending is real! Nvidia (NVDA) by any measure beat expectations (that were lofty), quite handily. Stocks couldn't hold the gains, but there seemed to be profit taking, an assumption - that is likely wrong - that all the benefits of AI will accrue to a mere handful of companies. And after a rally into earnings, we had Powell looming.
Any hint of tame data should spark a bond and stock rally.
Look for 10 year yields to head back to 4% in the coming weeks which should also be good for equities. But don't rush into large positions as the trend in August, which is often folly to fight, has been for weakness in both.
