Friends
The Fed raised the Fed Funds rate .75% (75 basis points) this afternoon. The leak to the Wall Street Journal turned out to be accurate as the Fed, somewhat shocked by last week’s CPI number, abandoned their plan to raise by 50 basis points. We haven’t seen a rate hike this large since 1994. In addition to today’s hike in interest rates the guidance for future rate hikes was raised and actually now falls more in line with where the market already was. So, if you want something positive to take away from today’s Fed action, is that for the time being the bond market and the Fed appear more in sync with each other.
Stocks had been in positive territory before the Fed statement, but unconvincingly so. After the release and Chair Powell’s press conference stocks moved higher. Of course, stocks have moved higher after each rate hike this year only to fall the next day and to new lows eventually. So, we’ll take a wait and see attitude with regards to where the market is heading in the short term.
As for today, by the close the Dow Jones Industrial Average was up 303 points to finish the day at 30,668. The S&P 500 was up 54 points to close at 3,789. The Nasdaq Composite Index was up 270 points to close at 11,099. Gold was up $23 to trade at $1,837 per ounce, while oil was down $2.73 to trade at $116.10 per barrel WTI.
The move in stocks after these headline events are as much about how traders were positioned going into the event as they are any conviction or belief. Economic data including monthly inflation data will drive investor sentiment for now. Will the Fed’s fight against inflation send the economy into a recession? Perhaps the inflation data will be moderate, and the Fed will be able to back off a bit on the size and speed of the rate hikes. The data will dictate the response, so all markets can do is wait for that data to unfold. As mentioned, the day after these rake hike announcements have not been good to the bulls. Let’s see how tomorrow and the rest of the week play out.
Have a nice evening everyone.
