The Dow Dropped 139 Points

I was out of the office most of the day but I’ll fill you in on the details: Today was an ugly day for the stock market. This was Day Four post-Fed and the markets are still reeling. The S&P 500 lost -1.21% and it had been much worse earlier in the day. Eighteen of the 20 Buy List stocks were down. Only Oracle ($ORCL) and Microsoft ($MSFT) closed higher. WEX Inc. ($WEX) is finally below my $75 Buy Below price.

There seems to be some organized pushback about the Fed’s policy from last week. Two FOMC members today stressed that the central bank will continue to be very accommodative.

On Friday, Jon Hilsenrath of the WSJ reiterated the dovish angles in the Fed’s current stand. I have to think this was a bit of damage control. The Fed is probably surprised at the strong reaction from the markets.

Looking at the markets, I’ve been very surprised that the five-year inflation expectations have dropped so much. In fact, the rise in bond yields seems well correlated with the drop in inflation expectations. I really don’t see how that makes sense, but I tend to give higher weight to the world that is rather than what may be.

Consider that the implied one-year Treasury yield two years from now has risen from 0.9% last Tuesday to 1.35% today.

Look at the jump in the 30-year TIPs yield:

fredgraph06242013

Posted by on June 24th, 2013 at 10:30 pm


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