NYSE MAC Desk

Fed Recap:

   
   
   
STRAIGHT FROM THE TRADING FLOOR
by Michael Reinking, Sr. Market Strategist
July 27, 2022 5:00 PM ET
DOW 32,198 (+436), S&P 500 4,024 (+103), Russell 2000 1,848 (+43), NYSE FANG+ 5,398 (+272), ICE Brent Crude $107.37/barrel (+$2.97), Gold $1,733/oz (+$15), Bitcoin ~22.8k (+1860)

MAC Desk Commentary:
As expected the Federal Reserve raised the target range for FF by 75bps to a range of 2.25% - 2.5%. The changes within the statement were not controversial. The language around economic activity was downgraded - “spending and production have softened”. There was no change related to the labor market. The language around inflation was largely unchanged though China lockdowns were removed as a driving factor. It was a unanimous vote with Esther George falling back in line. There were also no changes to the balance sheet runoff. This was pretty much as expected and the market moves were marginal as we waited for Chair Powell to take center stage.
 
The Chairman began his prepared remarks highlighting that inflation remains too high and the committee has the “resolve” to address this. He said this will likely entail below trend growth and a slowdown in the labor market. He did seem to emphasize the slowdown in economic activity pointing to slowing consumer spending, housing markets and business fixed investment. He said the labor market remains tight saying job growth has slowed but is still robust. He did say they are seeing some signs that inflation pressures could ease in the coming months but will look for compelling evidence of inflation falling. Early in the press conference he did declare victory on getting to a neutral stance and proceeded to kind of kill forward guidance saying it is appropriate to be in a “meeting-by-meeting” stance that will be data dependent, leaving himself with quite a bit of optionality.
Markets seemed to key on his commentary about the path of policy going forward. He didn’t take a “super-sized” hike off the table for September though he did say that it is reasonable to expect the rate of increases to slow at some point. Repeatedly, throughout the press conference he pointed to the June SEP suggesting these projections were still valid and said that the goal is to reach a somewhat restrictive stance by year end which translates to 3% - 3.5%. Nick Timaros of the WSJ did try to get Chair Powell to address markets pricing in rate cuts next year, which seemed to be a setup for the 1970’s conversation, but the Chairman wouldn’t bite. He was repeatedly asked about whether the economy was already in a recession which he said he did not believe to be the case. When talking about the expectation for the economy to slow down he did acknowledge that a path to a soft landing has narrowed.
 
Markets cheered the performance, and this feeds the narrative that much of the heavy lifting has already been done.  As I discussed in the Mid-Day this doesn’t necessarily help the Fed’s cause going forward. Equity markets extended the early gains ending just off of session highs. The S&P 500 closed up 2.6% with growth continuing to outperform by a wide margin (IVW +3.9% vs. IVE +1.4%). The NYSE FANG+ index was up >5%. Yields did move lower, but didn’t break below the recent lows. The US dollar index also moved lower retesting the recent lows ~106.25.
 
This evenings earnings have been flowing in. Tech is mixed with semis looking reasonably good, some weakness in cloud and Meta missed again but is only modestly lower. Ford put up very strong numbers. Best Buy negatively pre-announced and suspended their buyback. Earnings will continue to drive much of the action tomorrow. Claims and Q2 GDP will be released ahead of the open.
 
  • Earnings Post-Market: ALGN, AVB, AWK, BOOT, CAKE, CHRW, CINF, COLM, CTSH, CYH, DRE, EGHT, EQIX, EQT, ETSY, F, FBHS, FLEX, FORM, GL, HOLX, HP, INFA, INVH, JBT, LC, LRCX, MAA, MC, META, MKSI, MOH, MTH, MUSA, MXL, NLY, NOV, NOVA, NOW, NTGR, OMF, ORLY, PI, PLXS, PTC, QCOM, RJF, SLM, SSNC, STAG, TDOC, TROX, TYL, UPWK, URI
  • Thursday -
    • Earnings Pre-Market: AGCO, ALLE, AMT, AOS, BAX, BC, BEN, BTU, CARR, CG, CMCSA, CMS, CP, EW, EXP, FTV, HOG, HON, HSY, HTZ, IP, KDP, KEX, KIM, LAZ, LH, JHG, LII, LIN, LKQ, LUV, MA, MAC, MAS, MDC, MLM, MO, MRK, MTSI, NOC, OSK, PBI, PCG, PFE, RS, SAH, SIRI, SO, SWK, TMO, TNL, TROW, TXT, VC, VIRT, VLO, VSTO, WING, XEL
    • Earnings Post-Market: AAPL, AJG, AMZN, BZH, CC, CE, DLR, DXCM, EB, EIX, EMN, EW, FIVN, FSLR, HIG, INTC, KLAC, LHX, MHK, NATI, OLN, PRO, ROKU, SGEN, TXRH, UCTT, VFC, VRSN, WRE
 
Technicals/Sectors:
Tomorrow we’ll want to see that commitment to strength again as we had our 14th >2% close this year. In previous episodes, including some post Fed meeting, those gains have quickly evaporated. The market did take out last week’s high. It still feels like we could try to squeeze up to the late May/early June highs and the declining 100d which convene around 4,100.

 



Government Yields
  • US - 2yr -5bps to 3.010%, 5yr -9bps to 2.797%, 10yr -5bps to 2.734%, 30yr -1bps to 3.002%
  • USD index: -$0.72 to $106.33
  • VIX: -1.45 to 23.24
  • Bitcoin: +9.2% to ~22.8k
Have a good night.

Connect with NYSE



By submitting this form you hereby expressly grant permission to use the information included thereunder to contact you for the purposes of sending periodic updates about ICE and/or its affiliates.

Your contact information will not be used for any purpose other than that for which your consent has been given. To learn more about our privacy policy, please click here.

© 2021 Intercontinental Exchange, Inc.  All rights reserved. Intercontinental Exchange and ICE are trademarks of Intercontinental Exchange, Inc. or its affiliates. For more information regarding registered trademarks see: intercontinentalexchange.com/terms-of-usea