US STOCKS: Late Equities Roundup: Off Early Lows, Tech Stocks Still Lagging

• Major US equity indexes remain weaker in late Tuesday trade, still holding inside relatively narrow ranges as markets after the FOMC minutes release. Currently, the DJIA trades down 71.46 points (-0.15%) at 48393.76, S&P E-Mini Futures down 5 points (-0.07%) at 6950.25, Nasdaq down 24.2 points (-0.1%) at 23449.63.
• Thin holiday market participation exacerbated moves somewhat as Financials and Consumer Discretionary sector shares led declines in the second half, investment management shares weighed on the Financials sector: Ares Management -2.86%, Franklin Resources -1.95%, KeyCorp -1.07% and State Street Corp -1.06%..
• Williams-Sonoma -2.40%, eBay -0.98%, Wynn Resorts -0.90% and Las Vegas Sands -0.72%. weighed on the Discretionary sector.
• On the positive side, Energy and Communication Services led advances in the first half: Occidental Petroleum +2.72%, Halliburton +2.08%, Diamondback Energy +2.03% and SLB Ltd +1.91% buoyed the Energy sector. Meanwhile, Meta Platforms +1.33%, News Corp  +0.87%, Take-Two Interactive Software +0.82% and Walt Disney +0.77%.

The December Minutes have a section on "Special Topic: Balance Sheet Issues", describing the discussion leading to the FOMC deciding to immediately implement Reserve Management Purchases (RMPs) following the meeting.  Recall that the Fed announced that it would buy $40B monthly in bills, front-loaded so as to get reserve levels up in anticipation of the usual funding market pressures associated with April’s tax date, before tapering off RMPs thereafter. 

• The SOMA manager warned the Committee that "seasonal fluctuations in non-reserve liabilities were projected to lead to significant declines in reserves at the end of December, in late January, and especially in mid-to-late April", recommending the FOMC consider starting RMPs in December.
• As such "Participants discussed developments in money markets and whether starting RMPs was warranted to maintain reserves at levels consistent with the Committee's ample-reserves framework... With the continued increases in the spreads between money market interest rates and administered rates, as well as some other indicators of tightening money market conditions, participants judged that reserve balances had declined to ample levels. Accordingly, participants assessed that it was appropriate to begin RMPs and initiate purchases of shorter-term Treasury securities to maintain an ample supply of reserves over time."
• Of note was what wasn't in the Minutes as part of the discussion: for example there had been some expectations that the FOMC could announce temporary open market operations (TOMOs) to assist around crunch liquidity periods such as year-end, or tweak administered rates (ie lower IORB) to better ensure that policy rates remained within the designated ranges.
• Instead, the Committee kept its focus on RMPs and existing facilities to maintain order in funding markets, suggesting little urgency to change balance sheet policy any more aggressively than necessary: "Participants also discussed the role of standing repo operations and commented on their importance for interest rate control in the ample-reserves regime. Some participants emphasized their preference that standing repo operations play a more active role in rate control, with material usage during periods of elevated pressures in money markets. A couple of participants added that effective standing repo operations may allow for a smaller balance sheet on average. Several participants preferred to rely more on RMPs to maintain an ample level of reserves."
• There was some debate over the front-loaded purchasing nature of the RMP program however: "Participants generally agreed that providing the Desk flexibility to adjust the size and timing of RMPs was important because of the significant variation in the demand for Federal Reserve liabilities and the uncertainty surrounding projections of this demand. When discussing how to structure RMPs in light of this variation, several participants emphasized that they preferred to front-load purchases so that the total level of reserves supplied to the market would be enough to manage large anticipated seasonal swings in non-reserve liabilities without having to rely on standing repo operations. Some other participants, however, preferred to limit balance sheet size by conducting RMPs closer to periods of elevated demand for non-reserve liabilities and relying more on standing repo operations to damp upward pressure on rates. Several participants noted that aligning variation in SOMA Treasury bill holdings with variation in non-reserve liabilities would insulate reserve supply from TGA changes, citing research by the Federal Reserve staff."

• -2,000 WNH6 118-13, sell through 118-14 post time bid at 1443:28ET, DV01 $364,200.
• The 30Y Ultra-bond contract trades 118-10 last (-6)