Business Maverick

Business Maverick

Stocks Halt Rebound Before Historic Fed Decision: Markets Wrap

Stocks fell after disappointing economic data, with traders bracing for the biggest Federal Reserve hike since 2000 and awaiting more clues on how aggressively the central bank will tackle inflation.

Key for markets will be whether Fed Chair Jerome Powell’s commentary contains any hawkish surprises that could stoke concerns about an economic slowdown. Equities pushed lower as data showed growth at U.S. service providers eased in April while cost pressures worsened. The tech-heavy Nasdaq 100 underperformed. Treasury 10-year yields climbed to 3%. Oil jumped as the European Union proposed to ban Russian crude over the next six months and refined products by the end of the year.

The Federal Open Market Committee is expected to raise rates by a half point at the conclusion of its two-day policy meeting on Wednesday, and also announce plans to reduce the size of its bloated balance-sheet. The panel will issue its statement at 2 p.m. in Washington. Powell will hold his first in-person press conference in two years 30 minutes later.

JPMorgan Chase & Co.’s chief Jamie Dimon said the Fed should have moved quicker to raise rates as price pressures hit the global economy. The central bank should target inflation of 3% or 4% rather than focusing on tightening policy to the degree needed to ease annual price increases to its current 2% goal, Nobel laureate Paul Romer noted.

Comments:

  • “While our base-case remains half points today and in June, followed by a downshift to a quarter-point per meeting cadence, the reality is that the Fed has managed to successfully err on the side of delivering hawkish surprises since Powell was renominated last year,” wrote Ian Lyngen, head of U.S. rates strategy at BMO.
  • “Their fight against inflation is going to cause more pain in the marketplace at some point,” wrote Matt Maley, chief market strategist at Miller Tabak + Co, referring to the Fed. “The stock market will make lower-lows as we go through the year. With this in mind, we believe that investors should continue to use rallies to raise cash and get more defensive.”
  • “Today will be one of the most historic and possibly uneventful Fed meetings in a long time,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group. “I don’t think there is any chance the Fed hikes 75 bps as this committee is still run by a bunch of doves.”

Read: U.S. Cuts Quarterly Debt Sale, May Do So Again Even With Fed QT

Corporate highlights:

  • Lyft Inc. slumped after the ride-hailing company’s second-quarter forecasts disappointed Wall Street.
  • Uber Technologies Inc. delivered a positive outlook for earnings in the current period, signaling the company plans to capitalize on robust ride demand without compromising profits.
  • Moderna Inc. reported revenue that beat expectations, but said its Covid vaccine purchase orders for 2022 were unchanged from what it reported three months ago.
  • Marriott International Inc.’s earnings topped expectations as avid vacationers bid up room rates, advancing the lodging recovery.

Key events this week:

  • Bank of England rate decision and briefing, Thursday
  • OPEC+ convenes virtually for a regular meeting, Thursday
  • U.S. April jobs report, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 0.2% as of 10:27 a.m. New York time
  • The Nasdaq 100 fell 0.9%
  • The Dow Jones Industrial Average rose 0.2%
  • The Stoxx Europe 600 fell 0.6%
  • The MSCI World index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.2% to $1.0538
  • The British pound fell 0.2% to $1.2479
  • The Japanese yen was little changed at 130.07 per dollar

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 3.00%
  • Germany’s 10-year yield advanced four basis points to 1.01%
  • Britain’s 10-year yield advanced five basis points to 2.01%

Commodities

  • West Texas Intermediate crude rose 3.8% to $106.32 a barrel
  • Gold futures fell 0.3% to $1,864.10 an ounce
Gallery

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