ZINGER KEY POINTS
- Fed funds futures are pricing in a 87.8% probability of a 0.25% point hike to 4.75%-5%.
- Jeremey Siegel says a pause is unlikely as it may send a wrong message about the Fed’s perception of the banking crisis.
Early indications suggest Wall Street may get off to a negative start on Wednesday, as the focus shifts to the all-important Fed decision. Listlessness could characterize trading going into the Fed decision as the market debate a range of possibilities for the central bank’s rate move, although most bet on a 25-basis-point increment.
Cues From Tuesday’s Trading:
Stocks rallied out of the gates on Tuesday, as a rebound by regional banks provided an impetus to the market. The major indices opened notably higher and went about a consolidation move, with the buying interest perking up further in late-afternoon trading.
The Nasdaq Composite settled at the highest level in more than a month, while the S&P 500 Index and the Dow Industrials raced to their highest since early March.
Most sectors advanced, led by energy, technology, communication, financial, consumer discretionary and utility stocks. On the other hand, defensive sectors such as real estate, utility and consumer staple stocks gave back some ground.
U.S. Indices’ Performance On Tuesday
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq Composite | +1.58% | 11,860.11 | |
| S&P 500 Index | +1.30% | 4,002.87 | |
| Dow Industrials | +0.98% | 32,560.60 |
Analyst Color:
Wharton professor Jeremy Siegel expects stocks to sell off for a short time after the Fed decision is announced and the summary of economic projections is released. He expects the Dot-Plot curve, a graphical representation of the FOMC members’ prediction of future interest rate trajectory, to be interpreted as hawkish, given the Fed may not have got time to revise expectations based on the latest banking failures.
“[Jerome] Powell will then likely talk down expectations for future rate hikes at the press conference and give relief back to the markets,” he said.
Futures Today
U.S. Futures’ Performance On Wednesday
| Index | Performance (+/-) | |
|---|---|---|
| Nasdaq 100 Futures | -0.27% | |
| S&P 500 Futures | -0.13% | |
| Dow Futures | -0.09% | |
| R2K Futures | +0.73% |
Upcoming Economic Data:
The customary mortgage applications volume data for the week ended March 17 is due at 7 a.m. EDT. Mortgage applications volume was higher for a second straight week in the week of March 10, rising 5% compared to the previous week. Year-over-year comparisons show that the metric is bouncing around the bottom, having plunged 74%.
The Energy Information Administration will release its weekly petroleum inventory report at 10:30 a.m. EDT.
The Federal Open Market Committee, or FOMC, decision is scheduled for 2 p.m. EDT. The central bank will also release the latest economic forecasts and the Dot-Plot curve. Chairman Powell will host a press briefing at 2:30 p.m. EDT to shed further light on the March policy decision and the outlook.
Stocks In Focus:
- GameStop Corp. spiked over 40% in premarket trading following the release of its quarterly results.
- Troubled lender First Republic Bank continued its upward momentum and was seen up over 4%.
- Virgin Galactic Holdings Inc. climbed over 2.50%.
- Chewy Inc., KB Home, Steelcase Inc. and Worthington Industries Ltd. are among the notable companies reporting their earnings on Wednesday.
Top Analysts’ Call
- Adobe Systems Inc.: Piper Sandler reiterated Overweight rating and $415 price target.
- Luminar Technologies Inc.: Goldman Sachs downgrades from Neutral to Sell with $5 price target.
- Meta Platforms Inc.: KeyBanc Capital Markets upgrades from Sector Weight to Overweight with $240 price target.
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures have snapped their two-session winning run and were lower in the early European session on Wednesday. A barrel of WTI-grade crude oil rose 0.42% to $69.83.
Treasury yields came back down slightly after rising on Tuesday. The benchmark 10-year Treasury yield, which broke above the 3.6% mark on Tuesday, has retreated to 3.588%, down 0.018% points.
The major Asian markets advanced notably on Wednesday, as Wall Street’s positive lead triggered strong buying in the region. European stocks showed tentativeness in late-afternoon trading, apparently as traders move to the sidelines to see off the U.S. Fed decision.
—
Originally Posted March 22, 2023 – US Stocks Take A Breather Ahead Of Fed Decision: Analyst Sees Powell Bringing Relief To Market
Disclosure: Benzinga
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Benzinga and is being posted with its permission. The views expressed in this material are solely those of the author and/or Benzinga and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
