Morning Minutes 6/10/2020

Morning Minutes

FOMC Preview and Canada Retailer Earnings

June 10, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

US stock markets are bouncing back slightly this morning as investors await today’s monetary policy decision, statement and member forecasts from the Fed at 2:00 pm EDT. Dow Futures are up about 25 points or 0.1%, after the Dow fell 300 points or 1.1% yesterday. NASDAQ futures are up 83 points or 0.8% adding to yesterday’s index gain of  29 points or 0.3%.

No changes to interest rates or asset purchases are expected but investors may look to the statement and forecasts for hints of the Fed’s future plans. In particular, are any members anticipating a drop into negative interest rates, or additional asset purchases, what are current economic conditions and what is the Fed thinking a rebound could look like?

The chart below from the St. Louis Fed on their Adjusted Monetary Base (which is what analysts and journalists are usually referring to when they talk about the Fed growing or shrinking its balance sheet), shows that after ramping up stimulus in March and April, the growth of new asset purchases has slowed over the last six weeks and the adjusted monetary base has stabilized at a higher level near $5.2 Trillion on June 3, up from $3.4 Trillion on February 26th.

Investors may also compare the Fed’s forecasts with those out from the OECD this morning. The OECD forecast that a contraction of 6.5% in 2020 and a rebound of 5.2% in 2021 for Global GDP, while for the US, it forecast a contraction of 7.3% this year and a rebound of 4.1% next year.

Overnight economic news has been mixed. API reported an 8.4 mmbbl increase in US oil inventories, which has knocked the WTI crude oil price back 1.6% this morning. Meanwhile, mortgage loan applications continue to rebound strongly with 5% growth over week and 13% growth over year reported this morning.

In Canada today, Dollarama reported that sales for the quarter which ended May 3 finished at $844.8M, up from $828.0M in the same quarter last year. Same store sales fell 2.4% overall but same store sales at the locations which were able to remain open through the COVID-19 lockdowns were up 0.7%.  Results from Roots are due later today, followed by Lululemon tomorrow.

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