Stock Market Rally Tumbles As Fed’s Powell Hints At Slower Hikes, But Higher
Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally suffered major losses Wednesday following the Federal Reserve meeting.
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The major indexes rebounded after the Fed hiked rates aggressively yet again but signaled that it could start to slow the pace of rate increases. However, Fed chief Jerome Powell suggested that rates will peak at an-even higher level than previously forecast.
Investors should be cautious as the stock market rally suffers damage. But it’s not finished yet.
Albemarle (ALB), CF Industries (CF), Qualcomm (QCOM), Sarepta Therapeutics (SRPT), Fortinet (FTNT), Robinhood Markets (HOOD), World Wrestling Entertainment (WWE) and elf Beauty (ELF) reported after the close. There were several losers with ELF stock and Robinhood both earnings winners.
Before Thursday’s open, Cheniere Energy (LNG) and Quanta Services (PWR) report. Both Cheniere and PWR stock are trading near buy points in shallow cup-with-handle bases.
LNG stock is on IBD Leaderboard, while ALB stock, Sarepta Therapeutics and CF Industries are on the Leaderboard watchlist. CF and SRPT stock are on the IBD 50.
Fed Pivot To Slower Rate Hikes
As expected, the Federal Reserve raised interest rates by 75 basis points for a fourth straight meeting, to a range of 3.75%-4%.
The Fed hinted at a slower pace for rate hikes citing the lagged impact of “cumulative” tightening this year.
“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” according to the Fed’s post-meeting statement.
Powell Sees Higher Peak Rate
Fed chief Jerome Powell, speaking shortly after the Fed meeting announcement, agreed that policymakers could slow rate hikes as soon as December. He said the “speed” of rate hikes is less important now than where rates end up.
But Powell suggested that the fed funds rate could end up higher than the Fed’s September projection of 4.6%. That suggests a fed funds rate of 4.75%-5%.
Markets now expect a 57% chance of a December rate hike of 50 basis points, up slightly from just over 50% on Tuesday. That would push the fed funds rate to 4.25%-4.5%. Odds currently favor at least 50 basis points at the February meeting, to 4.75%-5%.
Friday’s jobs report will be important for setting rate hike expectations. The November jobs report, as well as two CPI reports, also will arrive before the next rate hike decision on Dec. 14.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed 0.15% and Nasdaq 100 futures advanced 0.2%.
Crude oil futures fell 1%.
The private-sector Caixin services purchasing managers index fell 0.9 point in October to 48.4, falling further below the break-even 50 level. Other China manufacturing and services reports also pointed to contraction last month.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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