Today is “Fed Day”...which means most of what I write about what the markets are doing this morning is probably irrelevant. Things will certainly change later.
But for now, equities are stable after a tumble yesterday. Treasuries, gold, and silver are mostly flat. Crude oil and the dollar are lower.
On the news front...
Today is the day the Federal Reserve will announced the results of its latest policy meeting. The consensus expectation is that Chairman Jay Powell & Co. will hike rates another 25 basis points to a range of 5%-5.25%. That would be the highest in 16 years. Most analysts expect officials to signal a pause, at least for a while, to assess the impact from the aggressive series of hikes pushed through so far.
Do I think the Fed SHOULD move? No. But it’s not my call. There are plenty of signs that the economy is softening, including most recently on the jobs front. Yesterday’s “JOLTS” report, for instance, showed that job openings fell to the lowest level since May 2021. Layoffs surged by 250,000 to 1.8 million – the highest since December 2020.
Another factor that may push Powell to pause: Regional bank turmoil. Shares of many banks plunged yesterday amid renewed fears of deposit flight and losses tied to interest rate movements. Shares of PacWest Bancorp (PACW) plunged as much as 14% in the early going this morning after losing 28% yesterday, while Western Alliance Bancorp (WAL) dropped 8% after a 15% slump. The broader S&P Regional Banking ETF (KRE) has shed 33% of its value year-to-date.
On the good news front, pharmaceutical giant Eli Lilly & Co. (LLY) announced that Phase 3 trials for its Alzheimer’s disease drug showed it having a significant, positive impact on patients. Called donanemab, it’s designed to slow cognitive decline in patients who have the disease by targeting amyloid plaque in the brain.
Lilly plans to pursue Food and Drug Administration (FDA) approval this quarter. LLY shares rose around 5% in the pre-market on the news.
