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Leigh Baldwin & Co.

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Day Traders Diary

8/23/18

The major indices were already in the process of paring larger losses registered earlier in the session, yet they jumped noticeably following the release of the FOMC Minutes for the May meeting.

The impetus for the positive, knee-jerk response was the acknowledgment in the minutes that, "... a temporary period of inflation modestly above 2 percent would be consistent with the Committee's symmetric inflation objective and could be helpful in anchoring longer-run inflation expectations at a level consistent with that objective."

The key takeaway from that statement for market participants is that it implies the Federal Reserve may not be as aggressive with its rate-hike path as feared.  That is, the statement mellowed budding expectations that the FOMC might see fit to raise the fed funds rate a total of four times this year.

From that standpoint, then, the minutes were regarded as "dovish" at first glance.  That perspective has registered at the front end of the yield curve, which saw a drop in the yield on the 2-yr note from 2.58% shortly before the release of the minutes to 2.53% after their release.

The stock market has had other things on its mind today, yet the specter of hawkish-sounding FOMC Minutes is no longer one of them.

Nothing in these minutes, however, did anything to resolve the uncertainty of the trade discussions with China (or to guarantee the June 12 summit with North Korea will be a success).  It will be interesting to see if the market can maintain the positive bias into the close or whether it succumbs to renewed selling pressure.

If it finishes with a flourish, it will suggest market participants aren't quite as hung up on the trade uncertainty as was advertised before the open.

The S&P 500 is down 0.1% after being down 0.5% at its low this morning

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