Stocks finished mixed after the Fed news yesterday (more on that below). But they’re weaker in the early going here, as are gold and silver. Crude oil is a bit higher, while Treasuries and the dollar are flattish.
On the news front…
We got the proverbial “Fed Pause” yesterday. The only problem for markets? It was a “Hawkish Pause.”
In other words, Jay Powell & Co. opted to keep interest rates in a range of 5%-5.25%. But they signaled in post-meeting comments and the “Dot Plot” forecast document that accompanied the announcement that another couple of rate hikes are likely coming later.
The Fed had raised rates 10 consecutive times over 15 months before this meeting. Four of those were oversized, 75-basis point moves, though the Fed has more recently dialed back its hikes to 25 points each. The next two meetings are scheduled for July 25-26 and September 19-20. Powell said they should be considered “live” ones (meaning, meetings that could result in a hike).
Across the pond, the European Central Bank (ECB) raised its benchmark rate by 25 bps this morning. That increased the deposit rate to 3.5%, a 20-year high. It follows other hikes from central banks in Australia and Canada in the last several days.
Meanwhile, on the economic front, a New York-area manufacturing index came in stronger than expected at +6.6 while a Philadelphia-area counterpart was in-line with forecasts at -13.7. Retail sales rose a greater-than-expected 0.3% in May, though the ex-autos reading was in-line at +0.1%. Initial jobless claims spiked to a fresh 20-month high of 262,000.
One last thing to note: While the Fed news hurt many sectors of the market, it couldn’t put a dent in the AI-driven names. Nvidia (NVDA), for one, ripped higher after the news. So did other large tech names – which just goes to show some stocks and sectors don’t trade off interest rate expectations!
