If one of the Fed’s goals in yesterday’s statement was to instill confidence in the market that they will do anything to make things better, they accomplished the exact opposite in that today we are even more worried about economic growth not only by the recent data but by the constant desire on the part of the Fed to do something. If there is one country in the world who can vote on the path the Fed has taken and has seen this movie already first hand, it’s the Japanese. The Nikkei closed down 2.7%, also hurt by a weaker than expected gain in June machinery orders. The Yen is at a 15 yr high vs the US$. The Shanghai index closed higher on the soft landing theme after bank loans, retail sales, and fixed asset investment were below expectations and CPI and IP were in line. The BoE cut its UK GDP forecast.
Proving again that low rates just doesn’t matter in a world of deleveraging and sluggish job growth, a new low in the average 30 yr mortgage rate barely moved the needle for refi’s and purchases according to the MBA. Refi’s rose .6% and purchases rose .3%. The ABC weekly confidence poll rose by 3 pts to -47 but remains 1 pt below the 12 month average. The yield curve continues to flatten post yesterday’s Fed announcement. The spread b/w 2’s and 10’s at 222 bps is the narrowest since May ’09. As if banks didn’t have a tough enough environment already to deal with, the FOMC flattens the curve. II: Bulls 41.7 v 38.9 Bears 27.5 v 33.3.