What Came Out of Jackson Hole This Morning

On the backs of slightly disappointing Chicago PMI but higher than expected University of Michigan's consumer sentiment survey, Bernanke appeared to have disappointed the market with his speech at Jackson Hole initially. When the speech was released, the S&P 500 dropped back down to 1400, after popping up all the way to 1410 before the speech.  Since then the market has moved back up with S&P 500 now being up by approx. 8 points.  VIX is down nearly 3%.  It appears that the market can continue to yearn for Bernanke's helping hand, which it expects will be helping the market when the FOMC meeting takes place in mid-Sept.

 

In short, Bernanke said that the Fed will not be ruling out any option.  But he also attempted to limit expectations by saying that Fed's actions "cannot fine-tune the economy".  Bernanke also said "monetary policy cannot neutralize fiscal and financial risks that the country faces".  The Fed's 'insurance coverage' of the financial market continues, inducing too much risk taking and creating a central planning strategy in this so-called capitalistic country.

 

Regarding this morning's economic indicators, the Chicago PMI print of 53.0 was lower than the 53.8 consensus.  It was also below July's 53.7.  Increase in production, new orders and employment sub-indexes, combined with lower inventories were positive.  However, order backlogs and supplier deliveries came in drastically lower than the prior month.  The Chicago PMI results support our manufacturing ISM estimate of 50.1.  That number will be released on Tuesday morning.

 

Lastly, University of Michigan consumer survey sentiment of 74.0 for August was higher than the 73.6 estimate, which was positive.