All Eyes On The Fed This Afternoon Image: Bigstock Stocks ended mostly lower yesterday ahead of this afternoon's FOMC announcement. After three back-to-back-to-back 75 basis point rate hikes, the market is expecting another 75 basis point hike today as well. The Fed Funds rate is currently at a midpoint of 3.13%. If the Fed indeed raises by another 75 bps this afternoon, that would put the Fed Funds rate at 3.88%. And that would leave another 50 bps rate hike left to go in December for the Fed to hit their end-of-year target rate of 4.4%. After that (February is the first FOMC meeting of 2023), they would only need to raise by another 25 bps to reach their projected terminal rate (the rate at which they expect to keep rates steady at for a while), of 4.60%. While there's not much suspense over how much they'll raise today (although, you never know for certain until it's done), the main interest is in what the Fed alludes to for the months and year to come. Will they stick to their 4.4% target for this year, and 4.6% target for next year? Will they hint at further tightening? Will they suggest an earlier than expected easing? Or will they stay the course that they recently put forth? That is what everybody will be tuning in for. The Fed will make their announcement on rates today (Wednesday) at 2:00 PM ET, and Fed Chair, Jerome Powell, will hold his customary press conference afterwards at 2:30 PM ET. In other news, earnings season continued with big beats from big oil and big pharma. We'll get another 442 companies on deck to report today (1,275 in total between today and Friday). Regarding economic reports, the PMI Manufacturing Index came in at 50.4 vs. last month's 49.9 and views for the same. The ISM Manufacturing Index came in at 50.2, down a bit from last month's 50.9, but slightly above the consensus for 50.0. Construction Spending ticked up by 0.2% m/m vs. last month's -0.6% and views for -0.5%. On a y/y basis, construction spending is up 10.9%. And the Job Openings and Labor Turnover Survey report (or JOLTS for short), came in at 10.717 million job openings, which was above last month's upwardly revised 10.280M, and the consensus for 9.875M. There are still way more jobs available than unemployed people to fill them. However, the jobs report everybody is really waiting for is Friday's Employment Situation report. But first things first. The main focus today will be the Fed announcement on rates. Could be a busy day. See you tomorrow, Kevin Matras Executive Vice President, Zacks Investment Research |
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