Dear "Listening" Fed, What Is The Market Telling You Now?

Update: Well that did not last long. Despite Fed's Williams' best efforts (and CNBC's best efforts) to spin his comments uber-dovish, it is clear, as one trader opined, "this is the stock market showing The Fed has lost credibility..."

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One day after former NY Fed president  Bill Dudley essentially told Bloomberg TV that the Fed would hike until something breaks as there was "not much evidence that monetary policy is too tight" pushing markets sharply lower, the current NY Fed president, and former Fed uberdove, John Williams reversed the narrative and sent stock soaring after a series of dovish comments on CNBC, saying that the "Fed is listening to markets very carefully" and is "hearing market concerns about risks to the economy."

Williams said that since the Fed is moving to data-dependent mode, that means "listening to markets" and added that the Fed is ready to "reassess and reevaluate our views" noting that further hikes are not a committment or a promise while adding that the Fed is attuned to both the possibility that the outlook may change and also attuned to "downside risks."

Adding more fuel to the dovish fire, the uber-dove also said that the plan to say on the current path "assumes the economy remains strong" and that the Fed will "adjust its views based on the data and outlook."

Finally, confirming what Powell said three weeks ago, Williams said that "we are now at the bottom range of estimates of the neutral rate", while adding - redundantly - that the Fed "wants a strong economy and the expansion to continue."

The one hawkish comment was that the Fed would not reconsider a balance sheet unwind at this point, to wit:

"We did not make a decision to change the balance sheet normalization right now but as I said we're going to go into the new year with eyes wide open, willing to read the data, and re-assess the economic outlook and take the right policy decisions."

Even so, Williams said he is "hearing concerns about what tariffs mean for the economy" and as a result the "outlook for global growth has become somewhat slower."

So while Williams did not say anything new per se, the underlining of the data dependence, and the confirmation that the Fed is closely looking at stocks was enough to send the ES soaring 1.5% higher, up 32 points to 2,500, with the Dow up some 350 points...

... as the USDJPY surges amid a broad "risk on" wave.

However, Williams then spoiled the party a little by confirming that the balance sheet is indeed on auto-pilot.

Notably stocks reversed after the machines had ramped them above the 'pin' levels of 2505.