US Stocks Lower After Fed and Paul Ryan Comments on Tax Reform

Stocks rose early in the morning as oil rose, bond yields moved up, and the ADP private employment report was strong.

Then midday, the markets reversed. The initial catalyst were in the Federal Reserve’s minutes from its last meeting. The Fed made several comments that could be interpreted as negative for stocks:

  • They don’t expect fiscal stimulus until 2018.
  • Some see the stock market valuation as high.
  • They said they are considering reducing their $4.5 trillion balance sheet this year, and this is likely viewed as effectively an additional rate hike.

None of this was helpful for stocks.

Shortly after the Fed minutes, House Speaker Paul Ryan was quoted in a Reuters story saying tax reform could take longer than healthcare overhaul, and that the House, Senate and White House aren’t yet on the same page on tax reform.

What’s this all mean? The market cares about three things right now: 1) the Trump Agenda, 2) interest rates, and 3) growth and the right valuation for the markets.

All three of these got smacked around a bit this afternoon. You can see these issues got the markets going by looking at volume, which has been terrible for weeks.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza