The S&P 500 is rolling into the FOMC meeting day having posted yet another record closing high. Given that, one might say that there doesn’t seem to be a lot of concern about what the market might see in the Fed’s dot plot today or what it might hear from Fed Chair Powell. Of course, therein lies the risk.
Given some of the higher-than-expected inflation prints of late, the resurgence in oil prices, the speculative action in AI stocks and cryptocurrencies, and initial jobless claims still running close to 200,000, a market at a record high could be labeled as being too complacent.
If the dot plot turns against the bullish-minded market, or Fed Chair Powell’s tone at his press conference turns more hawkish, and/or the Fed’s discussion for its balance sheet plans doesn’t unfold in the supportive manner the market thinks it might, then the potential for an outsized, negative reaction increases.
The focal point will be the dot plot, which in December showed a median estimate of three rate cuts before the end of 2024. The dot plot is part of the Summary of Economic Projections, which will be released at 2:00 p.m. ET along with the Fed’s policy directive. That directive is expected to indicate a unanimous vote to leave the target range for the fed funds rate unchanged at 5.25-5.50%. It will also contain some insight on the Fed’s quantitative tightening plans.
Fed Chair Powell will conduct his press conference at 2:30 p.m. ET.
The long and short of things (pun intended) is that today’s trading excitement could be reserved for the afternoon session.
Currently, the S&P 500 futures are down four points and are trading 0.1% below fair value, the Nasdaq 100 futures are up 30 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are down 71 points and are trading 0.2% below fair value.
The lack of current excitement in the futures trade notwithstanding, Chipotle Mexican Grill (CMG) has generated some excitement with news of a 50-for-1 stock split for shareholders of record as of June 18, 2024. CMG will start trading on a post-split basis at the open on June 26.
Stock splits have no impact whatsoever in changing the value of the stock. It’s like taking a $20 bill and exchanging it for four $5 bills. Either way, you still have $20. Nonetheless, stock split announcements often generate a feeling of goodwill and anticipation for new demand at the lower price, which then begets buying interest on the split announcement. Shares of CMG are up 5.7% in pre-market trading.
That move is lending a measure of support in the early going along with some modest gains in most mega-cap stocks and a calm Treasury market. The 2-yr note yield is unchanged at 4.69% and the 10-yr note yield is down one basis point to 4.29%.
Conversely, a 2.0% decline in Dow component Boeing (BA), after it warned of negative free cash flow of $4.0-4.5 billion in the first quarter, is not helping the cause.
The real cause and effect factor for today’s trading, however, will be the details seen and heard coming out of the FOMC meeting. At this point, with the S&P 500 at a record closing high, the market is hoping it won’t see evil, hear evil, or Fed Chair Powell to speak evil.
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Originally Posted March 20, 2024 – See no evil, hear no evil, and speak no evil (hopefully)
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