European stocks rose again with S&P futures higher, while Asian stocks were mixed. The dollar rose jumped on hawkish comments by Philly Fed's Harker, oil rose following optimistic OPEC comments, while gold dropped. Markets have largely ignored results by financial heavyweight HSBC, which posted its largest fall since mid-2015 after reporting a 62% plunge in pretax profit.
As part of the epic, multi-year criminal investigation into the doomed IPO of Spain’s frankenbank Bankia, Spain’s national court called to testify six central bankers and one financial regulator. The previously untouchable now stand accused of authorizing the public launch of Bankia in 2011 despite repeated warnings that the banking group was “unviable.”
After being held in contempt of Congress for twice failing to comply with a subpoena issued by the House Oversight Committee, Jason Chaffetz has sent a letter to Trump's new Attorney General Jeff Sessions asking him to convene a grand jury or bring charges against Bryan Pagliano, the now infamous IT-aide who was responsible for setting up Hillary's private email servers.
S&P equity futures followed Asian and European stocks lower, driven by weakness in Franch and Italian markets, as French political concerns returned; the pound tumbled after UK monthly retail sales unexpectedly dropped pushing the dollar higher and Euro lower.
Whether it is due to overnight news that much of the recent rally may have been due to one specific fund's cover of a synthetic "short SPY" trade, or just because algo traders have gotten a case of overbought robotic vertigo, S&P futures dropped 0.2% in early Thursday trading as risk appetite fizzled and European shares dropped on concern the longest rally since July 2015 went too far, while the yen, bonds and gold advanced as the dollar fell.
There are two key events on Washington's docket today both of which could be market moving: first Yellen continues her testimony on monetary policy in Congress, this time before the House, while President Trump is set to meet Israel's Prime Minister Netanyahu.
The global "risk on" melt-up continues. After a modestly hawkish Yellen warned that every meeting is live, and refused to take March off the table, sending the dollar and yield higher and the S&P to fresh record highs, world stocks rose hitting a 21-month high on Wednesday with the dollar rising for the 11th straight day, the longest positive streak since July 2015.
"The TRILLION dollar question is then reiterated: when does all of this “inflation as a good thing” tip over into “inflation with no growth”—aka STAGFLATION? This continues to be the chief concern of clients on recent marketing swings."
"We see these comments as expressing somewhat more support for near-term tightening than we had expected. We therefore have nudged up our subjective probability of a rate increase at the March FOMC meeting to 20% from 15% previously."
"Nonfinancial corporate business leverage has remained elevated by historical standards even though outstanding riskier corporate debt declined slightly last year. In addition, valuation pressures in some asset classes increased, particularly late last year."
"...waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession."