Why Today’s Fed’s Minutes Release May Result In Brief Market Chaos

Traditionally, when the Fed releases the Minutes for its most recent FOMC meeting, the sequence of events is that Bloomberg, Reuters and a handful of other news service blast flashing red headlines with the key highlights and soundbites, which are delivered to markets precisely at 2:00pm which then sets the market mood for the rest of the day, allowing algos to trade in kneejerk response to the initial information disclosure, and forcing analysts and strategists to goalseek their narrative to the market’s reaction: if stocks spike, the minutes are more dovish than expected, conversely if stocks slide, the Fed snuck in a few extra hawkish points, and so on. In fact, by the time people actually finish reading the full minutes which takes, well, a few minutes (the December release was 28 pages, but of these only 3-4 truly matter), sentiment has already been set, ironically by just a couple of headlines and how the headline-scanning algos react to them.

Which means that initial handful of headlines is critical; and what is just as important, is that the initial narrative is compiled by several members of the financial press as the Fed provides members of accredited news organizations access to the minutes shortly ahead of the public release time at a central-bank facility, allowing the journalists time to prepare headlines and articles reporting the content also at 2 p.m. local time when the general embargo is lifted.

Today, however, there will be no headlines at 2pm.

The reason: as a result of today’s U.S. government closure due to a snowstorm, the central bank will not release the minutes of its Jan. 29-30 meeting to the media lockup ahead of their normal release, preventing news organizations from reviewing the document before it becomes publicly available, and also preventing pre-written stories and headlines from hitting the tape at that very moment.

Due to inclement weather, Federal Reserve Board
offices in Washington, D.C. are closed today. The FOMC minutes will be released as scheduled at 2 p.m. See our updated release schedule: https://t.co/gZXP4SLXjJ

— Federal Reserve (@federalreserve) February 20, 2019

Instead, the Federal Reserve said the record of the meeting will be posted on its website at 2 p.m., as scheduled, meaning that the press will have to comb through the minutes along with the rest of the market and investing public, looking for key highlights and key words; more importantly it means that momentum-igniting, headline-scanning algos will have no basis on which to spark either buying or selling in the milliseconds following 2pm, and instead will drift higher or lower depending on which way the groupthink shifts in the initial seconds after 2pm as a barrage of hot takes and interpretations of the minutes hit the tape.

In short, prepare for some brief market chaos and/or confusion today, just after 2pm as the market scrambles to digest what the Fed said three weeks ago.