Thursday’s session was a roller coaster. It started out with a hotter than expected January CPI Report at 8:30am EST. The stock market initially gapped down but rallied back to breakeven in about an hour – though the yield on the 10 year treasury broke above 2% and stayed there.
Nothing much happened in the next two hours until Bloomberg reported hawkish comments from FOMC voting member James Bullard at 12:45pm EST that raised the probability of a 50 point rate hike in March and put an intermeeting hike on the table as well. As you can see in the chart above, the market started trending down in the wake of these comments.
As if that wasn’t enough drama for one day, two hours later Politico reporter Victoria Guida tweeted a quote from Fed watcher Economist Tim Duy that he wouldn’t be surprised to see an intermeeting move as soon as Friday or Monday. This led to a further intensification of the selling.
By the end of the day, Fed Futures were pricing in a 100% chance of a 50 point rate hike in March and there was a lot of nervous chatter about a possible intermeeting move as soon as Friday or Monday.
Indeed, tonight promises to be a long one as the specter of a preemptive move by the Fed tomorrow morning hangs over the market.