The DC Today - Thursday, February 1, 2024
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
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🗓️ 1 February 2024
⏱️ 9 minutes
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Summary
Today's Post - https://bahnsen.co/3SoXYtv
Welcome to the first day of February, and a 29 day leap year one at that. The Dow completely rebounded from yesterdays sell off in stocks, and the bond market has now had two big day of gains in a row with rates moving significantly lower across the curve. The Fed holding rates unchanged yesterday was expected, but the comments of a March rate cut not being the Feds base case until they see more supportive data is what moved markets.
Two quick points: The dot plots of where the FOMC sees rates by year end was unchanged following the meeting and 2-Yr treasury yields moving lower by 17 basis points in two days rather than higher isn’t a vote of confidence from the bond market its buying it at all. The reality is that economic data continues to be stronger than expected which is allowing them to take their time on easing policy, but markets are pricing it in advance anyway (as they always do). Speaking of stronger than expected economic data, there was a fair amount today with both productivity and ISM manufacturing data both beating expectations
Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the DC Today, your daily market synopsis of the Dividing Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. |
| 0:13.9 | Hello and welcome to DC today. Brian Saitel with you, it is Thursday, February 1st, first day of February, kicking off this leap year month. |
| 0:24.5 | We got a nice rally in stocks, actually. |
| 0:27.4 | And the Dow actually was up 369 points, which is more than yesterday, dropped 317 points. |
| 0:34.7 | The NASDAQ still lower by about 1% from yesterday. So yesterday's sell-off was mostly |
| 0:40.1 | undone, but not completely across every part of the market. But yeah, I mean, the big news has |
| 0:46.5 | been the Fed and the end of its meeting yesterday and keeping rates the same, which everybody |
| 0:50.9 | knew, of course, would be the case. But then kind of walking back, |
| 0:56.1 | the March rate cut, taking that off of the table was new news. And for a moment, stocks didn't like |
| 1:01.9 | it yesterday and then they seemed to turn around today. The bond market was unfated. It rallied |
| 1:07.8 | yesterday with yields going lower. And then it rallied again today with yields going |
| 1:12.9 | lowered again. The 10 year was down another nine basis points. So look, if you read into this, |
| 1:21.0 | the bond market isn't buying what the Fed just said, essentially, because you've got two-year |
| 1:25.1 | rates that are down 17 basis points in two days. |
| 1:29.3 | So two-year rates are short-term treasury rates. |
| 1:32.3 | They're closest that's tied to Fed funds. |
| 1:35.6 | And you've got a two-year treasury to Fed funds rate inverted by over 115 basis points now. So look, I think the market is pricing in what is inevitable, |
| 1:47.6 | which is that it's either March or it's May, |
| 1:51.2 | but it's probably not any farther than that. |
| 1:53.2 | And since this is February, what are we really talking about here, |
| 1:56.2 | 60 to 90 days? |
| 1:57.9 | And so markets tend to move in advance. |
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