Remember what I wrote yesterday morning about how “things will certainly change” after the Federal Reserve meeting results come out? Well, change they did!
Equities tumbled after the Fed hiked rates again along with crude oil, while Treasuries rallied and gold soared. This morning, stocks are weak again, while gold is up...again. In fact, the latter is trading right around an all-time high. Oil is flat along with the dollar, while bonds are weaker.
On the news front...
The Fed did what the markets expected – hiking rates another 25 bps to a range of 5%-5.25%. But stocks threw a tantrum anyway because Chairman Jay Powell wasn’t quite “dovish” enough in his signaling of a likely pause to the rate-hiking cycle. The next Fed meetings are set for June 13-14 and July 25-26.
It’s worth noting, though, that a collapsing dollar, surging gold, and the multi-week re-steepening of the Treasury yield curve are all classic signs of something. The end of a Fed rate-hiking cycle and the likely start of an economic downturn or recession. As a matter of fact, short-term interest rate traders are now increasingly betting the Fed will have to CUT rates as soon as September.
The other big story out there is the ongoing carnage in regional banks. Shares of PacWest Bancorp (PACW) plunged late yesterday after the firm said it’s seeking potential investors. It has about $44 billion in assets. Then this morning, Toronto-Dominion Bank (TD) called off its $13.4 billion merger with First Horizon (FHN), citing concerns it would not receive regulatory approval. That caused FHN shares to plunge.
If you’re looking for some “sorta good” news, the outplacement firm Challenger, Gray, & Christmas said layoff announcements slipped to 67,000 in April from 89,700 in March. Unfortunately, job cuts are up a whopping 322% year-over-year in the first four months of 2023.