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On August 2, Alexei Pushkov, a member of the Constitutional Committee of the Russian Federation Council, stated that the world cannot replace the amount of oil supplied by Russia, which accounts for about 10% of the global oil supply. Pushkov wrote on his social platform: "Despite Trumps warning of imposing high secondary sanctions tariffs, Indian refineries continue to purchase Russian oil. The Indian side explained that if the global market stops accepting 9.5 million barrels of oil per day from Russia, oil prices may rise to $135-140 per barrel. In fact, such a large amount of oil supply cannot be replaced at all, because Russia accounts for about 10% of the global oil supply."According to Argus on August 2, the eight core OPEC+ members will decide on August 3rd whether to fully exit their 2.2 million barrels per day (bpd) crude oil production cuts in September or adopt a more cautious approach due to heightened supply and demand uncertainty. The group has already decided to implement approximately 80% of its planned 2.46 million bpd production increase (including a 300,000 bpd adjustment to the UAEs quota). Market expectations are for another 548,000 bpd increase in September, matching the accelerated increase in August and restoring production 12 months earlier than originally planned. One delegate confirmed his countrys support for completing the full production increase in September, a move long advocated by several major members, particularly given that some countries have been producing above their quotas. However, due to concerns about oil prices, at least one member favored a cautious approach, suggesting that the 548,000 bpd increase be split into smaller adjustments of 137,000 bpd per month from September to December.On August 2nd, Federal Reserve Board Governor Kugler abruptly announced his resignation on Friday, giving US President Trump an opportunity to fill the Fed vacancy earlier than expected and potentially forcing him to finalize his next chairmanship months in advance. Derek Tang, an economist at the monetary policy analysis firm LH Meyer, said, "The ball is now in Trumps court. He has been pressuring the Fed to install his own candidate. Now his opportunity has arrived." While Powells term as chairman ends in May of next year, his term as a governor runs until 2028. If Powell doesnt voluntarily resign as a governor, Trump wont have another chance to fill the vacancy before 2028. In this scenario, Trump might be forced to fill Kuglers vacancy with a candidate he plans to promote as chairman. Tobin Marcus, head of US policy and political strategy at Wolfe Research, noted, "The key is that this is the only vacancy Trump can fill. If he wants to find the next Fed chair from outside, the nomination could be announced earlier."On August 2nd, Canadas retaliatory tariff increase against the United States earlier this year is leading the Trump administration to adopt a differentiated trade strategy with Mexico. Previously, Canada and Mexico enjoyed equal treatment—both were subject to a 25% base tariff and enjoyed extensive duty-free access under the USMCA. However, this situation took a sudden turn on Thursday: Trump announced a 90-day suspension of tariffs on Mexican goods, while simultaneously raising tariffs on Canadian products to 35%. Existing retaliatory measures have not only failed to curb the escalation of the conflict but have instead prompted even more severe retaliation from the United States. Economist and former Bank of Canada Governor Mark Carney has stated that retaliatory measures are limited in effectiveness. In fact, the Canadian government has diluted retaliatory tariffs through numerous exemptions, refrained from retaliating when the US raised steel and aluminum tariffs to 50%, and even eliminated its digital services tax at the request of the US.On August 2, the Palestinian Islamic Resistance Movement (Hamas) issued a statement today (August 2) emphasizing that "unless our national rights are fully restored, the most important of which is the establishment of an independent Palestinian state with Jerusalem as its capital and full sovereignty, we cannot give up armed resistance."

S&P 500 Continues Losing Streak, NASDAQ Bucks Trend with Small Gain after Fed Minutes

Florala Chen

Feb 23, 2023 16:34



The major U.S. stock indexes finished mixed on Wednesday with the NASDAQ Composite bucking the trend with a higher close. The Dow Jones Industrial Average finished lower while the S&P 500 Index took a loss for a fourth straight session.


On Wednesday, the blue chip Dow Jones Industrial Average settled at 33045.09, down 84.50 or -0.26%. The benchmark S&P 500 Index finished at 3991.05, down 6.29 or -0.16% and the tech-weighted NASDAQ Composite closed at 11507.07, up 14.77 or +0.13%.

Fed Minutes Offer Guidance on Rate Policy

Although the price action didn’t reflect it, investors have to be relieved with the release of the minutes since it gave them a little clarity, but did nothing to change the fact that interest rates are poised to move higher. While some analysts described the minutes as showing few surprises, some went as far as calling them stale.


Our work tends to lean to the “stale” side. There is a three week lag in the minutes and since the Feb. 1 policy decision, the financial conditions in the U.S. have changed quite a bit. The jobs market is still hot, inflation is still tilted to the upside, consumers are spending and the services industry is cooking.

Minutes Said Nothing to Alter Market Expectations of 5.35% Fed Terminal Rate

The key takeaways in my opinion are that the Fed is on a mission to keep raising rates until inflation is tamed, even as the risk of recession grows. And that “almost all” Fed official agreed to slow the pace of increases in interest rates to a quarter of a percentage point, and only “a few” participants outright favored a larger half-percentage point increase at the meeting, or said they “could have supported” it.


So let’s just conclude that stock market investors now know that the recent strength in economic data means there has not been enough progress toward taming inflation, which means the Fed will issue new projections at its March 21-22 meeting. It’s now up to investors to make the right adjustments and hedge the risk to reflect that higher rates are coming.


Money market participants now expect rates to peak at 5.35% by July and stay around those levels until the end of 2023. This is up from 4.88% at the end of January.

Momentum Still to the Downside as Investors Adjust to Higher Rates Scenario

There was nothing particularly bearish or bullish in the Fed minutes. So using the expected peak at 5.35% as their guide, investors are going to continue to adjust their portfolios to reflect this new higher terminal rate.

Wednesday’s Stock Market Internals

Most of the 11 major S&P 500 sectors fell, with energy and real estate the poorest performers. The pair declined 0.8% and 1%, respectively. Energy stocks fell because of sharply lower crude oil prices. Real estate stocks lost ground because of the jump in mortgage rates and its impact on property values.

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