Caution: Week Ahead Could Bring Another Fed Taper
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In addition to global currency concerns rocking the stock market Friday, there is a growing sense that the Fed will again taper its assets purchase program at next week's January 28-29, 2014 FOMC Meeting.
Fresh off a $10 billion haircut that was announced in December, and executed this month, the Fed could lower purchases by another $10 billion. If the Fed again cuts its mortgage and treasury bond buying equally, this would move mortgage buying down to $30 billion and treasuries down to $35 billion, or a total of $65 billion. This is down from the original $85 billion before this month's cut.
The expectation of an additional $10 billion haircut is supported by economists at Nomura Securities. "At the conclusion of the 28-29 January Federal Open Market Committee (FOMC) meeting, we expect the FOMC to announce another $10bn reduction in its asset purchase program," economists led by Lewis Alexander said. "We believe the Committee will take this step because of stronger economic data, moderate reaction of financial markets to the December decision to taper, and comments from FOMC participants suggesting they are comfortable with the economic outlook."
In addition to next week's FOMC meeting, there is a flurry of other economic datapoints that will impact markets:
Monday:
New home sales
Tuesday:
Durable goods orders, Case-Shiller, Consumer confidence, 2-year note auction
Wednesday:
Mortgage applications, FOMC policy statement, 2-yr floating rate note auction
Thursday:
Initial jobless claims, GDP, Pending home sales, 5-yr note auction, 7-yr note auction
Friday:
Employment cost index, Personal income, Personal spending, PCE index, Core PCE index, Chicago PM, U of M consumer sentiment.
Below is Nomura's calendar, expectations and consensus:
Fresh off a $10 billion haircut that was announced in December, and executed this month, the Fed could lower purchases by another $10 billion. If the Fed again cuts its mortgage and treasury bond buying equally, this would move mortgage buying down to $30 billion and treasuries down to $35 billion, or a total of $65 billion. This is down from the original $85 billion before this month's cut.
The expectation of an additional $10 billion haircut is supported by economists at Nomura Securities. "At the conclusion of the 28-29 January Federal Open Market Committee (FOMC) meeting, we expect the FOMC to announce another $10bn reduction in its asset purchase program," economists led by Lewis Alexander said. "We believe the Committee will take this step because of stronger economic data, moderate reaction of financial markets to the December decision to taper, and comments from FOMC participants suggesting they are comfortable with the economic outlook."
In addition to next week's FOMC meeting, there is a flurry of other economic datapoints that will impact markets:
Monday:
New home sales
Tuesday:
Durable goods orders, Case-Shiller, Consumer confidence, 2-year note auction
Wednesday:
Mortgage applications, FOMC policy statement, 2-yr floating rate note auction
Thursday:
Initial jobless claims, GDP, Pending home sales, 5-yr note auction, 7-yr note auction
Friday:
Employment cost index, Personal income, Personal spending, PCE index, Core PCE index, Chicago PM, U of M consumer sentiment.
Below is Nomura's calendar, expectations and consensus:
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