Friends
“they stab it with their steely knives, but they just can’t kill the beast.” Eagles sang that line during the song Hotel California back in the day. It can be applied to the Fed and the economy today. Fed Chair Powell and his colleagues have been raising rates (stabbing it with their steely knives) for more than a year now but they just have not been able to slow/kill the economy (the beast) enough to tame inflation. The Fed Chair said as much today before the Senate Banking Committee indicating that because the economy remains stubbornly strong the Fed is likely to continue to raise interest rates. The Senators wrestled with the Fed Chair over the damage in the jobs market that he is trying to cause, but he bobbed and weaved like Ali against Joe Frazier. But the stock market was not entertained. Stocks fell as market participants realized that more than a couple more quarter point rate hikes might be in store in coming months. Simply put, the soft-landing scenario took a severe blow today. We have continued to be cautious during rallies and have been firm in our belief that there was still more work to do before this cycle can be seen in the rear-view mirror.
As for today, by the close the Dow Jones Industrial was down 574 points to finish the day at 32,856. The S&P 500 was down 61 points to close at 3,986. The Nasdaq Composite Index was down 145 points to close at 11,530. Gold was down $35 to trade at $1,819 per ounce, while oil was down $3.05 to trade at $77.41 per barrel WTI.
The Fed Chair made it clear that the Fed will be data dependent with regards to next weeks likely rate hike. Friday’s jobs number and next week’s CPI data will determine if the next week’s hike is a quarter point or more. Now the markets have to wrestle with that for the next several trading sessions. Stay tuned.
Have a nice evening everyone.
