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Impact of Fed Official’s Hawkish Statement on Stock Market Stocks Feel the Heat from Hawkish Fed Remarks

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The stock market landscape this morning reveals a mix of performances: the S&P 500 Index ($SPX) (SPY) is up +0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.03%. Investors find themselves on rocky seas as stocks teeter today, seeking solace in the morning’s Q4 GDP report, which saw upward revisions, coupled with a dip in the core PCE price deflator, signaling a smoother economic landing on the horizon.

However, the tide turned with hawkish sentiments expressed by Fed Governor Waller on Wednesday night, propelling bond yields upward. Waller’s disappointment with recent inflation data and his stipulation of waiting for a couple of months of improved inflation figures before considering rate cuts created ripples in the market. As bond yields surged post this morning’s robust economic reports, the stock market grappled with limits on its upward trajectory.

Market Dynamics

End-of-quarter rebalancing and window dressing by stock fund managers provided key support to stock prices before today’s Q1 curtain call. Additional tailwinds blew in from European markets, where the Euro Stoxx 50 touched a remarkable new 23-year pinnacle. In a surprising twist, US weekly initial unemployment claims dived unexpectedly by -2,000 to 210,000, painting a picture of a more robust labor market compared to the forecasted increase to 212,000.

Reflecting an even sunnier economic outlook, US Q4 GDP flexed its muscles with an upward revision to +3.4% (q/q annualized), sailing past predictions. The sails of Q4 personal consumption were also filled with wind, revised upward to 3.3%, overshadowing expectations. Not all waters ran smooth, however, as the US Mar MNI Chicago PMI dipped unexpectedly to a 10-month nadir at 41.4, falling short of the forecasted increase to 46.0.

Global Market Vagaries

Steering through global waters, overseas markets displayed a mixed bag of performances: the Euro Stoxx 50 ascended to a 23-year peak, gaining +0.16%; China’s Shanghai Composite rebounded from a 4-week low to close up +0.59%; and Japan’s Nikkei Stock Index dipped to a 1-week low, closing down -1.46%.

Interest Rate Impacts

In the realm of interest rates, June 10-year T-notes (ZNM24) experienced a -1 tick descent this morning. The 10-year T-note yield inched up by +0.2 bp to 4.192%. T-notes faced headwinds from Waller’s dovish remarks and today’s stronger-than-anticipated US economic reports. Even so, T-notes managed to regain some lost ground after the unexpected downturn in the Mar MNI Chicago PMI and the March inflation expectations index by the University of Michigan.

Across the Atlantic, European government bond yields exhibited a mixed picture: the 10-year German bund yield increased by +0.5 bp to 2.297%, while the 10-year UK gilt yield decreased by -0.8 bp to 3.924%. Eurozone witnessed a positive uptick in Feb M3 money supply, escalating by +0.4% y/y, marking the most substantial surge in 8 months.

Key Stock Movements

Among the notable stock movements, Estee Lauder (EL) soared more than +5%, leading the pack in the S&P 500 after Bank of America’s upbeat upgrade. RH (RH) sailed high with over +14% gains, riding on positive fiscal forecasts for 2024. Technologies smiled on Snowflake (SNOW) which edged up more than +1% on insider acquisitions, enhancing investor confidence.

On the flip side, Carnival (CCL) took a -3% plunge after flagging $10 million profit implications from Baltimore’s Francs Scott Key Bridge collapse. Healthcare woes plagued Molina Healthcare (MOH), down over -1% post a downgrade by Bank of America Global Research. Charter Communications (CHTR) faced a -1% dip following a price target cut by UBS.

As the dust settled, the stock market spectacle saw a diverse array of performances, mirroring the ebb and flow of economic indicators and investor sentiments. With Waller’s words echoing in traders’ minds and economic fortitude being scrutinized with each data release, investors brace for turbulences and triumphs in the ever-shifting tides of the financial realm.

Earnings Reports (3/28/2024)

Highlighting earnings on the horizon are MSC Industrial Direct Inc (MSM) and Walgreens Boots Alliance Inc (WBA), offering further insights into market performance and future trajectories.

For more updates and expert analysis on the stock market, stay tuned for additional reports from Barchart.

Disclosure: The author of this article, Rich Asplund, does not hold any positions (either directly or indirectly) in the securities mentioned. The content presented here is purely for informational purposes.

Disclaimer: The author’s views and opinions expressed herein do not necessarily align with those of Nasdaq, Inc.

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