The Fed Still has Ground to Cover
The stock market rallied Wednesday following the 2 p.m. EST release of the results of the Federal Reserve’s policy meeting. The Fed raised interest rates by 75 basis points as expected but changed the wording of their accompanying statement slightly.
“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the Fed said.
The idea that the Fed might slow its tightening schedule to let the current hikes it has already made take further effect was seen as a dovish sign by market participants.
The rally did not last long as the comments from Fed Chairman Jerome Powell 30 minutes later were much more hawkish. Powell said the rate at which interest rates top out, the so-called “terminal rate”, would likely be higher than previously expected.
“We have some ground left to cover here, and cover it we will,” he said
Both bonds and stocks sold off on his comments. The S&P 500 index closed lower by 2.5% on the day, its worst performance on a Fed day since January 2021.
Powell’s comments likely mean that the market won’t turn higher until there is a turn in the economic data. Next up is Friday’s unemployment report for October. Economists expect the rate to increase to 3.6% from a previous 3.5% in September. In this case bad news would be good news. A higher-than-expected unemployment rate would mean the economy is cooling off and the Fed would likely not have to raise interest rates as much. Such a reading could spark a rally in stocks. On the other hand, if the rate is lower than expected we could be in for a further move to the downside.
The views and opinions of Mooney Navigator are those of the author who is not an associated person of Moomoo Financial Inc. The view and opinions of the author do not reflect the views of Moomoo Financial Inc. or any of its affiliates. The views and opinions of the author are provided for informational purposes only, do not constitute a recommendation of an investment strategy or to buy, sell, or hold any investment in any form, and are not research reports and should not be used to serve as the basis for any investment decision. All investments involve risk including the loss of principal and past performance does not guarantee future results.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
Sailing with macro & market analysis
Moomoo VP of Strategy
5738Followers
8Following
2989Visitors
Follow
为了梦想耕耘 : 。
Johnnie Worker : So we still have a long way to go
zSuperman : I guess there is a long ways to go for stocks. on the side lines we go!!
Justin Zacks OP zSuperman : A long way to go can be thought of in two ways, both for the Fed and for stocks.
It is about how high the Fed has already raised interest rates and how much further they may, as well as how far the market has fallen and how much more it might still fall.
It can also be about duration. How long it has been since the Fed started hiking and how much longer it may be until they are done.
The Fed has front loaded their hikes, so we may be more than halfway through the total increase, but they have done so over a relatively short period, the completion of the hiking cycle may not be halfway done yet.
The views and opinions of Mooney Navigator are those of the author who is not an associated person of Moomoo Financial Inc. The view and opinions of the author do not reflect the views of Moomoo Financial Inc. or any of its affiliates. The views and opinions of the author are provided for informational purposes only, do not constitute a recommendation of an investment strategy or to buy, sell, or hold any investment in any form, and are not research reports and should not be used to serve as the basis for any investment decision. All investments involve risk including the loss of principal and past performance does not guarantee future results.
GODGIVENFOOL139 : ok
GODGIVENFOOL139 : ok
BigB : No way
$Tesla (TSLA.US)$
romantic Chipmunk_49 : sweet