Wall Street Finally Gets the Fed’s Interest Rate Message: Morning Brief

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Thursday, September 22, 2022

Today’s newsletter by Jared Bleecker, a market-focused reporter for Yahoo Finance. Follow him on Twitter Tweet embed.

Stocks are finally listening to Jay Powell and the Federal Reserve.

In a highly anticipated move on Wednesday, the Federal Reserve raised its benchmark interest rate by 0.75 percentage points after it raised it by a similar amount in its two previous meetings. Powell & Co. also delivered a hawkish surprise by raising expectations of further hikes this year and next to a final final rate of 4.6%.

The Dow, Nasdaq Composite, and S&P 500 ended their day down about 1.75%. This is in stark contrast to the rally after the previous July meeting, which was arguably very hawkish as well.

What has changed since July? In August, Powell said at the Federal Reserve’s annual meeting in Jackson Hole, Wyoming, that the central bank would raise interest rates until “the job is done” to lower inflation.

Powell’s uncharacteristically short and direct message about Jackson Hole appears to be the deciding factor for the markets. doubled on Wednesday.

WASHINGTON, DC - SEPTEMBER 21: US Federal Reserve Chairman Jerome Powell looks at the notes as he speaks during a press conference following the Federal Open Market Committee (FOMC) meeting at Federal Reserve headquarters on September 21, 2022 in Washington, DC.  Powell announced that the Federal Reserve will raise interest rates by three-quarters of a percentage point.  (Photo by Drew Angerer/Getty Images)

WASHINGTON, DC – September 21: Powell announces that the Federal Reserve will raise interest rates by three-quarters of a percentage point. (Photo by Drew Angerer/Getty Images)

“My main message has not changed since Jackson Hole,” Powell said at a news conference on Wednesday. “The FOMC is intent on bringing inflation down and we will continue to do so until the job is done.” damned stock.

Looking at the two remaining meetings in 2022, markets are adjusting with a 0.75% probability of a fourth in October and 0.50% in December.

Former Fed Governor Larry Meyer is taking an extra step, forecasting a rise of 0.50% in February and 0.25% in March to complete the cycle. This brings the Fed rate down at 5.00% to 5.25% – a full 2.00 percentage points above the rate set on Wednesday.

Powell and his colleagues may have slept peacefully last night knowing that Wall Street got the message that interest rates will continue to rise – even if investors don’t necessarily like what they hear.

What are you watching today

Economic calendar

  • 8:30 a.m. ET: The current account balanceQ2, (expected $260.8 billion – $291.4 billion prior quarter)

  • 8:30 a.m. ET: Unemployment Complaint Ratesweek ending September 17 (218,000 expected, 213,000 over the previous week)

  • 8:30 a.m. ET: Ongoing Claimsweek ending September 10 (expect 1.400, 1.403 over the previous week)

  • 10:00 a.m. ET: leading indicatorAugust (expected -0.1%, -0.14% over the previous month)

  • 11:00 a.m. ET: Kansas City Reserve Bank. manufacturing activitySeptember (5 expected, 3 during the previous month)

earnings

  • costco (cost), Darden Restaurants (DRI), set of facts (FDS), FedEx (FDX)

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