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It's All About the Fed

Sheraz Mian

Friday, December 13, 2013

It’s all about the Fed at this stage, with investors suspecting that the Central Bank’s meeting next week will usher in the Taper. A combination of positive economic data and reduced fiscal overhang following the Congressional budget deal have increased the December Taper odds.

As a result, stocks have skidded, bond yields have risen and the dollar has strengthened against other currencies. Pre-open sentiment is indicating a positive open today, but it could very well be nothing more than a modest bounce-back after multiple negative sessions.

The Taper fixation notwithstanding, the budget deal out of Congress is a net positive for the market. The measure passed with overwhelming bipartisan support in the House on Thursday and is expected to get similar endorsement from the upper chamber next week.

This eliminates the risk that has bedeviled the nation over the last two years and culminated in a government shutdown two months back. The fiscal uncertainty was one of the reasons why the Fed held off on pulling the Taper trigger in September, the last time the markets overwhelmingly expected them to make the decision.

In economic data this morning, the November wholesale inflation numbers largely came in-line with expectations. In corporate news, Qualcomm (QCOM) elevated Steve Mollekopf to the CEO position from his current COO role, apparently in a bid to forestall reports that Microsoft (MSFT) was courting him to replace Steve Ballmer.

Adobe (ADBE) reported mixed results after the close on Thursday, but the software maker came out with better-than-expected subscription sales for its web-based Creative Cloud application.

Sheraz Mian
Director of Research

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