"Too Soon To Speculate On Coronavirus" - Clarida Doesn't Tell The Market What It Wants To Hear

Heading into today's speech by Fed vice-chair Richard Clarida, especially after yesterday's Bloomberg op-ed by former Minneapolis Fed president Narayana Kocherlakota urging an immediate, emergency rate cut because of the drop in the S&P coronavirus, the market was somewhat hopeful that Clarida would make at least a strong hint that if the selling continues the coronavirus pandemic got worse, the Fed would cuts rate.

Alas, with the S&P down more than 2.5%, the market did not get what it expected, when speaking at the NABE economic policy conference, Clarida said that the US economy and monetary policy are in a good place, noting that it is still too soon to speculate on whether the coronavirus will lead to a material change in US economic outlook, and assuring markets that the Fed is closely monitoring the outbreak (but not so close as to cut rates pre-emptively). In other words, the Fed remains data-dependent, not data-predictive.

Making matters worse, Clarida threw in a hawkish hint when he said that as long as incoming information remains broadly consistent with Fed's outlook, the current stance of monetary policy will remain appropriate, although he did admit that disruption from the virus could spill over to the global economy, even if such has not been seen yet.

Finally, pointing out what everyone knows well by now, Clarida said that the coronavirus will likely have a noticeable impact on Chinese growth, at least in Q1.

While stocks rebounded modestly into the Clarida speech, with ES bouncing 20 points just before the 3pm release of the prepared remarks, the lack of any tangible dovish encouragement will likely mean another LOD close as markets now openly tantrum, demanding more rate cuts.