Tags: Wal-Mart | Federal Reserve | Revolt | Stock

Hectic Earnings Season on Wall Street

Hectic Earnings Season on Wall Street
(Dollar Photo Club)

By    |   Thursday, 15 October 2015 10:26 AM

Wednesday produced only a 150-point loss in the Dow, consistent with the new volatility paradigm, but there was a flurry of activity among some prominent stocks that produced earnings surprises.

Even during the long, government-sponsored bull run, stocks that failed to meet earnings expectations were occasionally punished severely, as Wal-Mart (WMT) was when CEO Doug McMillon made a lengthy morning appearance without saying anything about what investors would later learn about forward guidance that growth would be uneven because investments would need to continue, to remodel stores, improve inventory management, and catch up with competitors for online business.

Recriminations then flew as McMillon shot back at critical analysts that if they had done their homework, they would have understood the impact higher wages and other expenses would have on earnings. Perhaps the company, which lost $20 billion in market cap in one day, might consider a refresher course in Investor Relations 101.

At the big picture level, this writer has said that investors could expect seasonal strength at the beginning of October, and this occurred.

Then, the tone of earnings season would influence how a possible year-end rally might unfold and the likelihood that the authorities would intervene in order to foster the rally to help Wall Street pay bonuses and maybe save some jobs.

Debate continued over whether the Federal Reserve will raise interest rates by a token amount to begin and then another token amount later in order to establish that it can get past the Zero Interest Rate Policy (ZIRP) that has prevailed for nearly a decade.

Instead, the Fed seems to be proving just the opposite, and some other commentators are contemplating the thesis this writer has espoused from the start – that the “emergency” policies put in place during the 2007-2009 episode of the financial crisis will remain indefinitely, and another episode may be in store.

CNBC’s Steve Liesman provides an update on the long-simmering discontent that has been brewing at the Fed at least since the 2008 crisis.

This writer recalls a brief conversation perhaps five years ago at an event in Washington when Professor Joe Mason, then at Drexel University but who left the glamour of Philadelphia for LSU, told this writer “the banks” were restive.

At first it wasn’t clear whether he was referring to the client banks or in fact to the regional bank presidents, but Mason made clear it was the latter, then ran to catch a train.

For many years there have been one or two malcontents who would criticize Fed policy internally, and occasionally one would dissent, but over the past five years the number has grown, and not all the unrest is coming from the right.

It is not confined to current FOMC members, either, as former presidents like Bill Poole (St. Louis), Richard Fisher (Dallas), and Charles Plosser (Philadelphia) continue to question policy and how it is made.

Liesman reported that, “Mutiny at the Fed” is the term that has been used by a newspaper “to describe what’s going on right now — two Fed governors, including Dan Tarullo yesterday, in an interview I conducted, saying they don’t think the Fed should hike this year, after Janet Yellen said in a speech in September she sees the Fed hiking in 2015.”

Liesman added, “It’s pretty unusual for the governors, as opposed to the presidents, to differ with the chairman,” and he mentioned Governor Brainard as the other dissenter.

Yellen values highly the collegiality of the board, and this writer suspects she can manage to keep the governors “sullen, but not mutinous.”

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Robert-Feinberg
Debate continued over whether the Federal Reserve will raise interest rates by a token amount to begin and then another token amount later in order to establish that it can get past the Zero Interest Rate Policy (ZIRP) that has prevailed for nearly a decade.
Wal-Mart, Federal Reserve, Revolt, Stock
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2015-26-15
Thursday, 15 October 2015 10:26 AM
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