HomeMarket NewsStock futures extend losses after FOMC meeting and Powell presser

Stock futures extend losses after FOMC meeting and Powell presser

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The latest statements from the Federal Reserve, delivered at the conclusion of a two-day policy meeting on Wednesday, are making waves in the markets. Federal Reserve Chair Jerome Powell stressed the need for caution moving forward, despite recent progress in dealing with inflation. He cited concerns about the economy’s resilience and the labor market. In line with this cautious approach, the central bank decided to keep interest rates unchanged for the second time this year. However, investors are eagerly awaiting the Federal Open Market Committee’s economic projections for clues about future monetary policy.

The Fed’s projections include estimations for the federal funds rate at the end of the year, with a median projection of 5.6%. This implies one more rate hike, which aligns with the previous projection in June. Additionally, policymakers raised their forecasts for the fed funds rate at the end of 2024 to 5.1%, up from the previous 4.6%. The median projection for the end of 2025 also increased to 3.9% from 3.4%. These adjustments, along with reduced expectations for rate cuts in 2024, caused benchmark indices to close the session lower. The Nasdaq experienced a decline of 1.5%, while the yield on the 2-year Treasury note reached 5.118%, the highest level since 2006.

Continuing the downward trend from Wednesday, stock futures have further declined overnight. As of 6 AM ET, the Dow is down 0.3%, the S&P 500 is down 0.5%, and the Nasdaq is down 0.8%.

During his press conference, Powell acknowledged the uncertainty of economic forecasts and the challenges involved in inflation assessment. He highlighted that the recent positive inflation readings should be viewed with caution, as only three readings have been taken into account. Powell emphasized that if the economy surpasses expectations, it may require additional monetary policy measures to return to the Fed’s target of 2% inflation.

What to Keep an Eye On:

Thus far, the Federal Reserve has managed to apply the necessary pressure on financial conditions with minimal negative impact on growth and employment. This approach has led the market to anticipate a β€œsoft landing” for the economy, contributing to the stock market’s stability throughout the year. However, it remains uncertain whether this positive trend will continue. Have the interest rate hikes of 525 basis points implemented since March 2022 already permeated the economy? Will the economy continue to thrive if these elevated levels are sustained until 2024? Furthermore, other potential challenges, such as rising energy costs, student loan repayments, labor strikes, or a government shutdown, could introduce additional complexities.

More Insights from the FOMC Meeting

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