Wall Street is finally getting the Fed’s message on interest rates: Morning Brief

Wall Street is finally getting the Fed’s message on interest rates: Morning Brief

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Thursday, September 22, 2022

Today’s newsletter is at Jared Blickre, a market-focused reporter on Yahoo Finance. Follow him on Twitter @SPYJared.

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

In a much-anticipated move on Wednesday, the Federal Reserve raised its benchmark interest rate by 0.75 percentage points after raising it by a similar amount at the previous two meetings. Powell & Co. A hawkish surprise is also available by raising expectations for a further rise this year and the next to a final rate of 4.6%.

The Dow, Nasdaq Composite and the S&P 500 all finished the day down about 1.75%. That is in stark contrast to the crowd that was there after the meeting in July before, which could be said to have been rather hawkish, too.

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

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

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

WASHINGTON, DC – SEPTEMBER 21: Powell announced that the Federal Reserve is raising interest rates by three quarters of a percentage point. (Photo by Drew Angerer/Getty Images)

“My main message from Jackson Hole has not changed,” Powell said at a press conference on Wednesday. “The FOMC is committed to reducing inflation and we will continue to do so until the job is done.” Stocks be damned.

Looking ahead to the remaining two meetings in 2022, markets are adjusting to a quarter of 0.75% in October and 0.50% in December.

Former Fed Governor Larry Meyer is taking it a step further, predicting a 0.50% hike in February and 0.25% in March to complete the cycle. This lands the Fed’s terminal rate at 5.00% to 5.25% – a total of 2.00 percentage points above the rate set on Wednesday.

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

What To Watch Today

Economic calendar

  • 8:30 am AND: Current Account BalanceQ2 (-$260.8 billion expected, -$291.4 billion in the previous quarter)

  • 8:30 am AND: Initial claims without a jobthe week ending September 17 (218,000 expected, 213,000 during the previous week)

  • 8:30 am AND: Ongoing claimsthe week ending September 10 (1.400 expected, 1.403 during the previous week)

  • 10:00 am AND: Leadership IndexAugust (-0.1% expected, -0.14% in the previous month)

  • 11:00 am AND: Kansas City Nutrition. Manufacturing ActivitySeptember (5 expected, 3 during previous month)

Earnings

  • Costco (COST), Darden Restaurants (DRI), Set of Facts (FDS), FedEx (FDX)

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