Cautious Federal Reserve

As is typical of FOMC days the stock market was goosed higher today along with crude oil prices which rallied $2.12 a barrel to $38.46 a barrel given the Fed smash on the US dollar today.

The Federal Reserve in its FOMC meeting announced once again they would do nothing, saying not a lot has changed since last December. The Fed says it sees another rate hike sometime in 2016 and that the Fed expects, “economic activity will expand at a moderate pace and labor market indicators will continue to strengthen.”

Today, the Consumer Price Index was released and the headline number came in at -0.2% for February, driven lower by a 13% decline in the gasoline index last month. That should be quickly reversed given the springtime gasoline increases. However, core inflation (without food and energy) came in at 0.3% and is running above the Fed’s target of 0.2%, arguing for another rate hike, perhaps by June if core inflation persists.

Still, the Fed fears the state of the overall global economy, which has been deteriorating rapidly and it knows the US is not immune to the future. It also knows that the government has been jerry rigging the government economic data to carry on the illusion of growth in order to protect big banks and their vulnerability.

Yet the damaging effects of Obamacare are taking a toll.

I think one of the more revealing numbers released today is that of total business sales, which are down by 5.1% from their July 2014 peak.

Notice that business sales begin turning down just about the time when US business are being compelled to implement the Affordable Health Care Law or face stiff penalties or taxes, as health insurance premiums soar. This is certainly affecting total business sales.

Just five days ago Factset revised their S&P 500 earnings estimates downward for Q1 2016 to -8.3%, marking the first time the index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009. In other words, earnings are plunging while the big banks are pumping up stocks just before Q1 2016 earnings are to be released.

I think the Fed/big banks will try and ramp prices at least until the end of the month perhaps until April 15th but with earnings projected to be this bad the market at any time could suddenly crash once the big banks take profits on this pump and dump cycle.

Today, industrial production fell -0.5%. The current decline in US manufacturing would be the first time since 1952 that Industrial Production has declined for four straight months without the US economy not producing a recession.

This chart is telling us industrial production remains in recession. Retail sales and total business sales are in recession and corporate earnings are in dropping in recession but I guess no one is to know this until the central bankers are ready.