Fed Minutes had nothing incrementally alarming, and stocks drifted higher. A few even benefited from trapped shorts perhaps, and jumped a bit 'briskly'. Then came reports (mostly really just positioning) implying Vienna Oil talks going better, Oil dropped and there was an immediate improvement in 'tone'.
Little has been resolved. NATO continues to suggest Russia strengthening its presence surrounding Ukraine, not retreating in any way as Moscow and the German delegation had suggested. Today also got glimpses of a strong retail sales report, and that allows a continued 'firmer' policy by the Fed, or really a continuation of the existing intentions often discussed. Rates firmed slightly.
Lots of other things are changing in February's second half. The CDC finally is going to retreat from mask mandates (people know enough to make their own decisions on vaccines too, and a single annual 'far better' vaccine will get a bit of speculation), the CDC will also 'jump ship' on COVID testing and restrictions, a bit of which has started today. Also I think the combined tough stances that NATO, the U.K. and especially France's Macron took, dissuaded Putin, if he calls the whole matter he created entirely off, not wanting to bust his economy which benefited mightily from just have Oil prices higher, without actual war. I suspect all of this has at least a chance to help stocks, 'if' the Fed cooperates.
As to Ukraine and Russia, as the parties 'try' cooling their jets a bit, a member reminded me of one of Winston Churchill's lesser-known sayings, reported in a couple ways by Washington newspapers at the time. It boils down to:
“It is better to talk jaw to jaw than to have war."
And while that brings visions of that incredibly long table separating Putin this week from all visiting (Germany's Scholz or France's Macron), yelling might it seemed be necessary. Still, they were talking which is preferable to engaging in conflict on the battlefield, which some hawks seem almost eager to initiate.
(In this case I wonder if Jake Sullivan, Nat'l. Security Advisor, could be viewed as hawkish, since he was a key member of Hillary Clinton's team trying to see Donald Trump was significantly connected to Russia. If of course leadership in Russia starts behaving as a normal country, a promise in the 'post-cold-war' era could come to fruition. Recall how many big U.S. public companies had a sizeable presence quickly in 1990's Russia after 'perceived freedom' seemed to have arrived. Then things degraded over time, and with various poisonings and lies, plus rampant corruption, which dominates Putin's autocratic regime.)
But for now, the tension with Ukraine's neighbors continues. Once a year ago or so I mentioned Moldova, wedged in-between Romania and Ukraine. Now it is pretty obvious Russia is moving-into that region too, directly opposite NATO forces in Romania, Bulgaria and so on. Those 'were' actual Soviet dominated satellites before the Cold War ended, whereas Ukraine was a different status.
So yes I suspect everyone can claim victory if negotiations gel further, but we are not there yet, and there's risk some of the optimism is premature, or might be scuttled if one General Russia's Army triggers a pretext, interestingly alone whether Putin (his pal) endorses it or not. Fingers crossed they avoid that.
Meanwhile you have stories that are important regarding internet privacy, as a decision by Google (GOOGL) to stop cross-app tracking on Android phones is really a demand by consumers, who vastly prefer not being tracked (these days it's far easier to do that as almost all phone apps will ask whether you allow it or not).
Post-privacy advertising will be figured-out, but for now it's a challenge. And if you include Meta (FB) in this picture, they're vying to compete with TicTok and so far ineffective in generating revenue with their version (Reels). I do think they'll figure out a revenue model but we're long gone from investing in it. And by the way there are new reports that everything on TicTok basically finds its way into Chinese servers, should Beijing wish to do data tracking. It's not as serious as other social media 'dating' sites that harvest data generally voluntarily provided by users, but far more personal than on normal sites. The need for reform in all these areas exists, and regulators trail far behind reality.
Analysts are starting to recognize slowing paces of growth among mega-caps and that's an issue. Apple, Facebook and a few others tend to believe they are not seeing diminished interest, while particularly with FB it's shifting some.
The pundits that were cheering Roblox (RBLX) and then threw in the towel on it, fail to recognize that the social and e-commerce spikes retain huge multiples that in my view were not and are not justified. You start hearing this from pundits, but they never mention how last year's buybacks intentionally buoyed stocks for a bonanza of gains, hence the heavy insider selling in almost all of them.
The argument about laggard stock performance can be attributed to so many areas of the market just now, as part of that relates to moving from pandemic to endemic COVID status, while another part relates obviously to Fed policies.
The Fed Minutes didn't covey even the heart of how hawkish Bullard was, so it is possible the market liked that aspect of the day (besides the Oil decline). As to the Fed, current economic and financial conditions would likely warrant a faster pace of balance sheet runoff than previously seen, was my takeaway of the FOMC minutes. So I don't detect anything particularly impressive.
Bottom-line: the market has forced the Fed to recognize the inflation issue, as well as maybe moving faster to 'get it over with' as far as removing liquidity. It is unclear how the mix of balance sheet draining and rate hikes will unfold.
while Thursday might try to be up or even sloppy, it's still focused on what Russia does or doesn't, and so far Moscow tries covering its tracks by claiming a withdrawal, when the evidence says the opposite, for now. How that plays (besides Oil prices which will likely rebound incidentally) matters.
People seem to 'want' markets higher as I've been mentioning, but it's a rocky climb at best.
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