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Buckle Up! A Very Important Number

Well the big number of the week will be released in about 20 minutes–the consumer price index (CPI). This report coupled with the same report next two months will be huge factors in deciding if the Fed Funds rate gets lowered at the FOMC meeting in March. Of course we have a FOMC meeting the end of January, but it is generally agreed there will be no rate action at this meeting. The CME FedWatch Tool shows a 97% chance of no change in rates in January. The odds of a rate cut in March now stands at 65%–it had been 70% until last weeks employment report and then fell to 55%–now creeping back higher.

Both equity and interest rates are quiet right now–the S&P500 is up the smallest of amounts and interest rates are off a few basis points from yesterdays close with the 10 year treasury at 3.99%. We could see equities and interest rates move dramatically after the release of the CPI. The headline number is forecast to rise to 3.2% from 3.1% last month–while the core number is forecast to to fall a bit to 3.8% from 4% last month. Variations from these forecast could cause dramatic moves in markets.

Right now I have no plans to do any buying or selling today–sit back and watch the day play out. Yesterday I did SELL another portion of my Bridgewater Bancorporation 5.875% preferred (BWBBP). I had a good til cancelled sell order in and a portion of it executed at $19.65–a gain in this account of about 26% (I hold it in 2 accounts)–no dividends received on this tranche. So 2/3rds of this position has now been sold.

So let’s sit back and see if we have fireworks–or if it is a non-event. I hope it is a non-event, but the potential for crazy action is sure out there.

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