The Nasdaq posted a nearly 3% loss, and the S&P closed at a new 2022 low.
Dan thinks your best bet is to listen to the guidance that many companies are about to give us in the next few weeks. Dan thinks it is hard to trade day-to-day right now with the way the markets are reacting to fed governors comments.
Guy said if you think we are going the way of the BOE, think again. Guy thinks the S&P could trade to 3000 and it still wouldn't concern the Fed. He thinks the only thing that will concern the Fed is the credit markets.
Dan thinks your best bet is to listen to the guidance that many companies are about to give us in the next few weeks. Dan thinks it is hard to trade day-to-day right now with the way the markets are reacting to fed governors comments.
Guy said if you think we are going the way of the BOE, think again. Guy thinks the S&P could trade to 3000 and it still wouldn't concern the Fed. He thinks the only thing that will concern the Fed is the credit markets.
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NewsTranscript
00:00 Does this all suggest that there is more pain to come?
00:05 Tim.
00:06 Well, listening to the Fed, listening to Bullard and Mester today, we heard a couple of things
00:09 that to me should be alarming if you were expecting the Fed to kind of cave like seemingly
00:14 every other central bank in the world is caving now.
00:16 But the discussion of real rates when in fact we've got CPI numbers that are still kind
00:21 of north of 8 percent and at least the last numbers we got is scary to think about.
00:25 Right.
00:26 You can't qualify that with, well, we want real rates at least north of the core PC,
00:31 CPI, whatever you want to say.
00:33 But that was troubling.
00:35 The dynamic about, hey, we need to see the unemployment level get to at least four and
00:39 a half percent.
00:40 So that, you know, first to me, real talk about levels.
00:43 And we're nowhere close.
00:44 We had a jobless claims number this morning.
00:46 That was the other side of this.
00:47 The job market's not showing any softening.
00:50 And in fact, Bullard pointed out that the job market is going to continue to be tight.
00:54 We've got a lot of work ahead of us.
00:55 So listening to the Fed yesterday when look, equities, as we say on this desk all the time,
01:00 are not going to go any higher until we see some relief from interest rates, until we
01:03 get some some sense of where not only the terminal rate is, but maybe even where long
01:07 rates are.
01:08 And that's not the terminal rate, but the dollar.
01:10 So what was yesterday's rally all about?
01:12 It was a day and a half of a rally in the bond market spurred on by this more of this
01:15 sugar high that comes from central banks.
01:18 It's not real.
01:19 In fact, the UK is going to make inflation a whole lot worse.
01:21 And I think we're going to talk about this later in the show.
01:23 Every intervention is temporary.
01:25 And here we are, Dan.
01:26 Yeah, listen, I think if you're going to trade day to day by what these Fed governors are
01:30 saying or whoever the heck they are, I mean, I think it's ludicrous.
01:32 I really do.
01:33 And I think that we're going into a period right now we're going to hear from companies.
01:36 They're going to give us guidance.
01:37 And I think that if you want to take them at face value, that's probably your best bet
01:41 in trying to figure out where the stocks or the companies that you own, what the direction
01:45 is going, because like day to day, hey, listen, you know, yesterday, I did not think that
01:49 was a great rally.
01:50 I didn't feel great about it one way or another.
01:52 But to kind of have it all reversed and then have the S&P close at a new cycle low here,
01:58 that's some bad stuff here.
01:59 And the fact that it's caused by some Fed governor saying something, you know, I'm looking
02:03 here, I just kind of look at the guys talked about this and put my Adami hat on for a second.
02:07 Neil Kashkari, you know, the head of the Minnesota Federal Reserve.
02:11 This was the biggest dove on the planet.
02:13 And now every other day, he's coming out and talking about the Fed can't stop until this.
02:18 Why are we again, why are we listening to them?
02:20 Why are the markets moving hundreds of billions of dollars or trillions a day based on this?
02:25 Because again, I mean, we kind of know that they're going to stay the course for a while
02:29 and then they're not.
02:30 And then they're going to get more dovish and then then stocks will rally.
02:33 But like to trade them day to day like this is insane.
02:36 I agree with Dan actually on just about every point.
02:39 Right.
02:40 So two days ago, if I had said to you, Mester is going to come out and she's going to be
02:42 super hawkish, it would not have been a surprise in any way at all.
02:46 And yet yesterday's activity more not I guess parts of it were completely reversed, some
02:51 of it not.
02:52 But it's odd that here we are.
02:54 It's the same same thing.
02:55 What's happening in the UK is sort of the opposite.
02:58 And people are all up in arms there.
02:59 You can't do that.
03:00 The Fed, you can't do this.
03:02 Right.
03:03 So you got to find a Goldilocks tightening scheme that isn't going to piss everybody
03:07 off.
03:08 Well, that's not possible.
03:09 And I think that people are really pissed at the Fed that they're going too far.
03:12 I actually I would be I would be if I were in the Fed's shoes, I wouldn't listen to that
03:18 because they really just started.
03:21 They got to see it through a little bit if for no other reason that they need credibility,
03:26 even if they are going too far.
03:28 So I think we're going to continue to see that as Dan will get to earnings.
03:31 We'll see right now the market is trading down on the same news again and again.
03:35 Hawk down, hawk down.
03:36 Right.
03:37 That doesn't make any sense to me.
03:38 So we'll start to see earnings.
03:39 If I were a company, I would probably guide lower if I guided at all.
03:43 It was 48 hours ago.
03:44 I sat here and said, look, the setup was such that we should have one of these mind numbing
03:49 rallies, these violent rallies in a bear market.
03:51 And I thought we were on the precipice of that.
03:52 And I looked like a genius yesterday.
03:54 And today I look like my normal self once again.
03:57 So here we are.
03:58 I think we're all pretty consistent.
04:00 And part of the show is trying to be tactical for opportunities.
04:02 And today was really a miserable day to Dan's point.
04:05 I thought the market would rally another 3 percent off of yesterday's action.
04:09 Clearly, it didn't happen today.
04:10 But Tim, at the nail on the head, if you think we're going the way of the Bank of England,
04:15 think again.
04:16 And they trotted these people out, I think, to tell that message exactly.
04:19 Absolutely.
04:20 Like, if you think that if you think we're going to flip it in store or anything like
04:24 that, people, because, again, the only thing that's working against them right now is the
04:29 market.
04:30 And I don't think that's in their purview right now.
04:31 I think the S&P could trade to 3000 and they wouldn't move.
04:34 The thing I think is going to concern them.
04:36 And if you're waiting for a pivot, it's going to come in the form of the credit markets.
04:39 And we're not there yet.
04:40 Well, and we're looking around the world again.
04:43 I think we recognize that the Fed is really the one that's pushing other central banks
04:46 around and they're doing what they have to do.
04:47 But when when the Bank of Japan continues to be focused on yield curve targeting and
04:51 that they let the yen weaken and what's going on in the U.K., these are not solutions.
04:55 If you think about where we are in the biggest markets in the world in fixed income and bonds
05:01 and the turbulence that we're seeing, that's why we're all so pessimistic here.
05:05 The good news over the last couple of days and it's last couple of days, it's really
05:09 three sessions probably.
05:11 But Fed fund futures have topped and have even come down to the last three days.
05:15 So the Fed fund futures expectations of the market, despite all these comments out of
05:19 the Fed, has come down probably 35 basis points.
05:23 The dollar has come down two and a half percent.
05:25 Those are the two things I would think that are the most important dynamics to settle
05:29 in and actually give some ground in the case of the dollar.
05:31 If you want to get bullish on equities, we have had some relief.
05:34 I'm not telling you we've reversed, but I'm telling you we've had three days of constructive
05:39 action there.
05:40 Isn't the dollar move though mainly the pound sort of being okay, stabilizing, because it's
05:47 12 percent of the dollar index.
05:48 I mean, and I guess the question is how long do you believe that keeps up?
05:52 Because based on what everybody else in the whole world is doing, the dollar is going
05:56 to be relatively stronger.
05:57 Just quickly on that, I think what you saw the other day were some ingredients for a
06:02 blow off top in the dollar.
06:03 You had everything in the world, dollar over shot.
06:05 It's the most crowded trade in the world, of course, but you're absolutely right.
06:08 You start to see a little rebound in the pound.
06:10 That's the beginning of some normalcy.