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[Stocks were up early on Wednesday but the Fed meeting minutes were released and it showed that the Fed was concerned that inflation has been heating up again. Stocks sold off midday but came back to close just modestly lower after recovering about half the losses. Yields and the dollar were up, adding to the pressure on stock and bond prices. Nvidia reported after the bell, beating estimates and trading higher, so that could set the tone for today's trading. The Dow lost 200 points but it was the S and I-fund that felt the most pain.

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The Key Points from the Fed Meeting Minutes were highlighted by CNBC:

“Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent objective,” the summary stated.

"The minutes also showed “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”
"The meeting followed a slew of readings that showed inflation was more stubborn than officials had expected to start 2024."

We've talked several times about the 1970 and 80's inflation having boomerang comebacks so the Fed may not be as enthusiastic about cutting interest rates this summer as investors had been hoping, let alone the 6 or 7 cuts we had been told to expect in 2024. However, the Fed Funds probability of a rate cut in July or September only changed a few percentage points and there's still a 50% chance of a cut by September, despite the comments yesterday.




Nvidia did beat their earnings estimates after the bell last night, announced a 10 for 1 stock split, and increased their dividend, all of which was enough to see some buying after the close yesterday. It was good, but was it good enough considering the hype? Well, it was bouncing between +4% and +6%, pushing the stock price above 1000 / share for the first time in after hours trading, despite expectations being so high. It is a big part of the S&P 500 and Nasdaq so they have some wind at their backs today, but we've also seen before with Nvidia where after hours gains didn't always hold into the close the following day, so we'll see.

The 10-year Treasury Yield was up prior to the release of the Fed meeting minutes, and after, and it is back above its 50-day EMA, and the dollar was up even more impressively.



The dollar (UUP) moved up 0.31% yesterday so we saw, not only stocks - with the I-fund losing close to 1% on the day, but also gold, silver, oil, and even copper actually fell 6% after a tremendous rally in that metal in recent months. That may have actually been good news as the run up in copper had inflationary implications, so a pullback might be welcomed.




Nvidia's price has been increasing in after hours trading while writing this so I can only guess where it will end up today, and as I said, this could set the tone for the day's action, but the market may also need to continue to price in inflation being more stubborn than investors had been anticipating. Keep an eye on those yields.

From tsp.gov: Holiday Closing

"Some financial markets will be closed on Monday, May 27, in observance of Memorial Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (May 27) will be processed Tuesday night (May 28) at Tuesday's closing share prices."

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The S&P 500 (C-fund) tested the recent highs again while trading within that small narrow blue channel. There was a flat top look going on but that could have also been considered as a bull flag, and it looks like Nvidia may provide the catalyst for a breakout. It has still come a long way in a short amount of time so there is certainly risks at this level. Not all stocks in the S&P 500 are behaving like Nvidia.




DWCPF (S-fund) took a decent hit yesterday with yields up and the Fed talking about a possible rebound in inflation. The channel on this chart is broken, so that's a warning for the shorter term trend traders who may be exiting. Long term investors are probably not as worried.




The EFA (I-fund) took one on the chin with that big rally in the dollar and red returns in the Asian and European indices overnight. Yesterday I mentioned that the 0.15% loss in EFA didn't look right consider the losses across the board overseas. Perhaps this is payback.




BND (bonds / F-fund) was down on higher yields and technically it is hanging onto that 71.70 area that I have been focusing on as key support. That's still the focal point.




Thanks so much for reading! We'll see you back here tomorrow.

Tom Crowley


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