Markets are mostly pricing in recession scenario
Stocks are finally coming around to the idea that the Federal Reserve is willing to push the economy into a recession to tame inflation, according to Chris Zaccarelli, chief investment officer of Independent Advisor Alliance.
“The market is beginning to believe that the Fed is willing to cause a recession in order to bring inflation back down,” said Zaccarelli.
He added that it seems that a recession scenario is about two-thirds priced in because stocks are down about 20% from all-time highs, instead of 30%.
“We would continue to exercise caution in the near term as the Fed is determined to keep raising rates until inflation begins to drop closer to their Fed Funds target,” he said.
Tech leads S&P 500 bounce
Tech stocks led a bounce in the S&P 500 that pushed the broad market index up about 1% on the day at one point.
As of 2:49 p.m. ET, the S&P 500 tech sector was up 1%, with Nvidia, DXC Technology and Skyworks among the best performers. Megacap tech stock Microsoft was also up more than 1%.
— Fred Imbert
Market rebounds in volatile trading as Powell speaks
Stocks rebounded from their session lows as Powell began his news conference.
The Dow and S&P 500 hovered around the flatline as of 2:40 p.m., while the Nasdaq Composite traded 0.1% higher. The major averages were down sharply after the Fed announced its decision to raise rates by 75 basis points — giving up gains from earlier in the day.
Aggressiveness Fed is signaling is a surprise, could risk recession, BofA says
The Federal Reserve raised interest rates by 0.75 percentage point Wednesday, its third consecutive hike of that size, to cool down high inflation.
The central bank also raised its terminal rate – how far it expects to hike before pausing – to 4.6% in 2023. By the end of the year, it will get to 4.4%, which means there’s at least one more 0.75 percentage point hike coming.
That’s more than some expected and potentially signals that the Fed is willing to push the U.S. economy into a recession.
“The extent of the aggressiveness that the Fed is signaling did indeed surprise us,” said Mark Cabana, head of U.S. short rates at Bank of America. “This is very consistent with the recent shift in commentary from the Fed, and it certainly sounds like a Fed that is absolutely okay risking recession, bringing inflation lower with restrictive monetary policy.”
—Carmen Reinicke, Patti Domm
Market reverses after Fed announcement
The major averages gave up gains from earlier in the day after the Fed raised rates and said it sees the terminal rate going to 4.6%.
The Dow, which was up more than 100 point heading into the announcement, was last down more than 200 points. The S&P 500 and Nasdaq were also lower.
Stocks making the biggest moves midday: Freyr Battery, Stitch Fix and more
Here are some of the stocks making the biggest moves during midday trading:
- Freyr Battery — Shares of the electric vehicle battery maker shot up 17.6% after Morgan Stanley said the company’s price target was double where it is now. The bull estimate for the price was three times over its current price.
- Stitch Fix — Stitch Fix was up about 12%, even after the company posted downbeat quarterly numbers. The online styling company lost 89 cents per share in the previous quarter on a net revenue that was down 16% from the same quarter a year ago.
- General Mills — Shares of the food producer jumped 7% after the company posted a better-than-expected quarterly profit. General Mills also raised its full-year sales forecast amid higher prices and strong demand for cereal, snacks and pet food.
— Sarah Min
Expect a ‘short-lived’ relief rally coming off of Fed decision, Wolfe Research’s Senyek says
Prepare for a brief market rally after the Federal Reserve doles out its rate hike decision on Wednesday, Wolfe Research’s Chris Senyek says.
“Our sense is that markets could be set up for a short-lived relief rally if the Fed hikes by +75bps and Powell doesn’t ratchet up his hawkish rhetoric even further,” he wrote in a note to clients. “That said, we don’t anticipate having to change our intermediate-term bearish call.”
Going forward, Senyek expects core inflation to remain sticky. That will likely force the Fed to raise the fed funds rate to 5% or greater if it hopes to achieve its long-term goal of 2%.
Vital Knowledge’s Adam Crisafulli agreed with Senyek’s sentiment.
“The consensus view is that stocks will squeeze after the Fed this afternoon before surrendering the whole move and then some Thurs, Fri, and beyond,” he said in a note to clients Wednesday.
— Samantha Subin
Yield on 2-year Treasury note tops 4% for first time since October 2007
The yield on the 2-year Treasury note hit…