Today is Columbus Day, so don't expect any U.S. data or Fed speakers. Banks and the bond markets are closed.
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Minneapolis Fed President Neel Kashkari has had it with the "hubris and stupidity" of Wall Street bankers.
His latest grievances are with investors who claim the Fed is being bullied by President Trump and traders pointing fingers at the central bank for the liquidity crunch in the repo market that the Fed just announced a $60 billion a month standing facility to address.
Background: The systemically important repo market is where banks can quickly borrow cash in exchange for collateral like U.S. Treasury notes. Rates in the market jumped well above the Fed's target rate in recent weeks, prompting around $300 billion in daily injections from the New York Fed.
Between the lines: However, Kashkari points out that the Fed provides a so-called discount window where banks can access cheap emergency funding to deal with exactly the sort of liquidity squeeze that hit the repo market. They just don't want to use it, which renders the window ostensibly useless.
Flashback: Looking back at his time working under former Treasury Secretary Hank Paulson, Kashkari said the same problem presented itself in 2008 during the financial crisis.
"Why did Sec. Paulson and [then-Fed Chair Ben] Bernanke bring the 9 bank CEOs into Treasury on Sunday night and say 'You’re all going to take TARP at the same time?' Because if any of them said no they would all say no. It’s amazing. We have to work so hard to compensate for their own hubris and stupidity."
British politicians, including Prime Minister Boris Johnson, are urging caution on optimism for a possible Brexit deal between the U.K. and EU and say there remains "significant" work to be done, but investors have thrown caution to the wind and bet big on the British pound.
Illustration: Sarah Grillo/Axios
Wall Street was bursting at the seams with excitement about a trade deal between the U.S. and China — until details of the deal were revealed.
What happened: The S&P 500 was flirting with a 2% rise for the day, and then details of the agreement started leaking out and the market's gains leaked with them.
Between the lines: The S&P closed 1.1% higher, and the reversal looked like a typical bout of "buy the rumor, sell the news," but comments about the deal from top strategists and money managers suggest many view the agreement as too little, too late.
What they're saying: A flood of investment strategists and fund managers added their 2 cents. Goldman Sachs' analysts see a 60% chance more tariffs are put in place by the end of the year and expect the drag on manufacturing to continue.
While the most talked-about news on Wall Street proved to be a downer, U.S. equities are poised to get a power boost from 2 big sources soon.
What happened: On Friday, the Fed announced plans to buy $60 billion of U.S. Treasury bills a month “at least into the second quarter of next year.”
Why it matters: Despite the central bank's insistence that the cash injections “do not represent a change” in its monetary stance, it will help boost market liquidity and help stave off a crunch analysts were predicting could torpedo the stock market later this year.
The market could also be buoyed by its old friend corporate buybacks. Companies increased buys of their own shares in the third quarter after a notable slowdown in the second.