Stocks End Mixed Ahead Of Today's Fed Announcement On Rates Image: Bigstock Stocks closed mixed yesterday with the Dow and the S&P modestly in the red, while the Nasdaq finished modestly in the green. All of the indexes started off in positive territory, before turning lower shortly thereafter. Then they chopped around for the rest of the day, trading on both sides of unchanged before the closing bell. The PPI-Final Demand Report came out yesterday and showed inflation rose 0.8% m/m (in line with expectations), and 10.8% y/y (just under last month's 11.0% pace and the consensus for the same). Ex-Food & Energy, it was up 9.7% y/y vs. last month's 8.8%. And ex-Food, Energy & Trade Services, it was up 6.8% y/y vs. last month's 6.9%. While the headline number moderated just a bit, it's still coming in at roughly 40-year highs. And that comes on the heels on last week's CPI report which hit a new high for this year, coming in at a 41-year high. Inflation, and therefore interest rates, will be the focus again today as the Fed will make their announcement on rates at 2:00 PM ET. After Friday's elevated CPI report, and yesterday's PPI report, there's plenty of speculation that the Fed could depart from their telegraphed 50 basis point hike, and raise rates by 75 basis points or even 100 basis points. So, not only is there lots of uncertainty surrounding what the Fed will do. But there's just as much uncertainty regarding how the market will react. If the Fed goes bigger, and faster, investors could applaud the move as a sign that they're finally getting serious about mitigating inflation sooner rather than later. But the interpretation could go the other way, as dramatic rate increases (or even faster quantitative tightening), could create enough demand destruction to send the economy into a recession. After the announcement, Fed Chair, Jerome Powell, will have a press conference, where reporters will ask him a host of questions in hopes of better understanding the Fed's current outlook, and where they expect to see rates by the end of this year and next. While the Fed news will be the main event today, we'll also get other economic reports today which includes MBA Mortgage Applications, Retail Sales, the Empire State Manufacturing Index, Import and Export Prices, Business Inventories, the Housing Market Index, and the Atlanta Fed Business Inflation Expectations report. Should be a busy day. See you tomorrow, Kevin Matras Executive Vice President, Zacks Investment Research |
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