NYSE MAC Desk
Fed Recap:
STRAIGHT FROM THE TRADING FLOOR
by Michael Reinking, Sr. Market Strategist
Patricia Medina - Market Strategy Analyst
June 12, 2024 5:00 PM ET
DOW 38,712 (-35), S&P 500 5,421 (+46), Russell 2000 2,057 (+33), NYSE FANG+ 10,954 (+188), ICE Brent Crude $82.41/barrel (+$0.49), Gold $2,341/oz (+$14), Bitcoin ~68.1k (+719)
As widely expected for the seventh consecutive meeting the Federal Reserve left the Fed Fund Target rate unchanged at 5.25% - 5.5%. The only change to the statement was a slight tip of the cap to the recent inflation data, “In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective” from “lack of further progress”. The vote was unanimous.
Moving to the Summary of Economic Projections. The big debate coming into today’s meeting was whether the DOT plot would show 1 or 2 potential cuts this year. This was a somewhat hawkish surprise showing only 1 cut. There are now 4 officials who project no cuts up from 2 previously while 7 officials expect one cut. However, the projections for 2025 and 2026 now show 4 cuts up from 3 previously. The Longer Run rate did move higher for the second consecutive time up to 2.8% from 2.6%.
Projections for 2024 GDP and unemployment held steady from the March meeting at 2.1% and 4%, respectively (with the unemployment especially surprising to me). Inflation projections for 2024 were revised higher by 0.2% and 0.1% in 2025. With Core-PCE not returning to the Fed’s stated target until 2026.
Broadly there were some hawkish surprises within the meeting materials. The biggest for the market was the 1 cut projection, but as we suggested earlier the market had already repriced and the sting of this was offset by increased easing expectations in 2025/2026. That being said, it was impressive to see only a modest downtick in the equity and Treasury rally ahead of the press conference.
Chair Powell could have done a Bono impression today evoking the first line of the fitting song “One” at the start of his press conference, “Is it getting better. Or do you feel the same”. This was one of the more boring press conferences in some time as the messaging has remained pretty consistent and non-committal. Chair Powell seems very content with the current policy stance and didn’t offer many new clues.
During the press conference he did once again downplay the importance of the DOTS highlighting that the end game hadn’t really changed when taking into account changes for out years. In regard to the increase in the PCE projections, and the fact that it signals an increase from current levels, he noted that this was a conservative estimate taking into account the rolling off of some very low numbers in the back half of last year. Sticking with inflation he did applaud today’s number but highlighted this is only one print.
Moving to the labor market he continued to suggest that it remains resilient and is moving back into balance. He did acknowledge the widening gap between the establishment and household survey. He also downplayed the cooling in Q1 GDP suggesting that underlying demand remained strong. Which goes to one of the bigger surprises for me today, the fact that neither of these metrics were revised by Fed officials, which seems to ignore the current trajectory of moderation. Chair Powell once again reiterated it would take an “unexpected weakening” in employment which he said was more than forecast, the range for unemployment rate in forecasts was 3.8% - 4.4%.
I don’t really think much changed today in the Fed’s higher for longer, wait and see, data dependent policy stance. Chair Powell continued to maintain optionality regarding timing with a bias to ease. Today’s CPI print has started the clock but will need to be followed a couple more positive prints. There are 3 more monthly reports before the September meeting, keeping hopes alive.
Treasuries started to give back some of the post-CPI gains after the meeting materials and ultimately gave up about half of the move ending down 5-11bps across the curve. The USD index also bounced back ending down ~0.5% at $104.60. The dollar strength did cause commodities to pullback from intraday highs.
Broadly equities held the bulk of the earlier gains. The S&P 500 closed at another new all-time high up nearly 1% but the breadth within the index did deteriorate in the back half of the session. The Russell 2k closed near the lows giving up about half of the earlier gains but still ended higher by a solid ~1.5%.
Broadcom is up ~10% in the after-market following earnings which will help keep the positive tech sentiment alive. Ahead of the open in the US PPI and claims will be released and the stream of Fed officials will start coming out of the woodwork.
Earnings:
After-Market: ATEX, AVGO, CMTL, CURV, GURE, MVLA, OXM, PLAY, SBNY, WINT, WRAP
Pre-Market: CANF, DLNG, JBL, KFY, KR, SIG, UPHL, VNCE, WLY
After-Market: ADBE, BYSI, EGIO, ITI, NICK, POWW, PROC, RFIL, RH, SFES, UONE
Sectors/Other Asset Classes:
Have a good night!
- Fed leaves target rate unchanged at 5.25% - 5.5%
- DOTS show only 1 cut in 2024
- Chair Powell delivers consistent message maintaining optionality
- 7 of 11 S&P 500 sectors trading higher: Tech leads, Energy/Defensives lower
As widely expected for the seventh consecutive meeting the Federal Reserve left the Fed Fund Target rate unchanged at 5.25% - 5.5%. The only change to the statement was a slight tip of the cap to the recent inflation data, “In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective” from “lack of further progress”. The vote was unanimous.
Moving to the Summary of Economic Projections. The big debate coming into today’s meeting was whether the DOT plot would show 1 or 2 potential cuts this year. This was a somewhat hawkish surprise showing only 1 cut. There are now 4 officials who project no cuts up from 2 previously while 7 officials expect one cut. However, the projections for 2025 and 2026 now show 4 cuts up from 3 previously. The Longer Run rate did move higher for the second consecutive time up to 2.8% from 2.6%.
Projections for 2024 GDP and unemployment held steady from the March meeting at 2.1% and 4%, respectively (with the unemployment especially surprising to me). Inflation projections for 2024 were revised higher by 0.2% and 0.1% in 2025. With Core-PCE not returning to the Fed’s stated target until 2026.
Broadly there were some hawkish surprises within the meeting materials. The biggest for the market was the 1 cut projection, but as we suggested earlier the market had already repriced and the sting of this was offset by increased easing expectations in 2025/2026. That being said, it was impressive to see only a modest downtick in the equity and Treasury rally ahead of the press conference.
Chair Powell could have done a Bono impression today evoking the first line of the fitting song “One” at the start of his press conference, “Is it getting better. Or do you feel the same”. This was one of the more boring press conferences in some time as the messaging has remained pretty consistent and non-committal. Chair Powell seems very content with the current policy stance and didn’t offer many new clues.
During the press conference he did once again downplay the importance of the DOTS highlighting that the end game hadn’t really changed when taking into account changes for out years. In regard to the increase in the PCE projections, and the fact that it signals an increase from current levels, he noted that this was a conservative estimate taking into account the rolling off of some very low numbers in the back half of last year. Sticking with inflation he did applaud today’s number but highlighted this is only one print.
Moving to the labor market he continued to suggest that it remains resilient and is moving back into balance. He did acknowledge the widening gap between the establishment and household survey. He also downplayed the cooling in Q1 GDP suggesting that underlying demand remained strong. Which goes to one of the bigger surprises for me today, the fact that neither of these metrics were revised by Fed officials, which seems to ignore the current trajectory of moderation. Chair Powell once again reiterated it would take an “unexpected weakening” in employment which he said was more than forecast, the range for unemployment rate in forecasts was 3.8% - 4.4%.
I don’t really think much changed today in the Fed’s higher for longer, wait and see, data dependent policy stance. Chair Powell continued to maintain optionality regarding timing with a bias to ease. Today’s CPI print has started the clock but will need to be followed a couple more positive prints. There are 3 more monthly reports before the September meeting, keeping hopes alive.
Treasuries started to give back some of the post-CPI gains after the meeting materials and ultimately gave up about half of the move ending down 5-11bps across the curve. The USD index also bounced back ending down ~0.5% at $104.60. The dollar strength did cause commodities to pullback from intraday highs.
Broadly equities held the bulk of the earlier gains. The S&P 500 closed at another new all-time high up nearly 1% but the breadth within the index did deteriorate in the back half of the session. The Russell 2k closed near the lows giving up about half of the earlier gains but still ended higher by a solid ~1.5%.
Broadcom is up ~10% in the after-market following earnings which will help keep the positive tech sentiment alive. Ahead of the open in the US PPI and claims will be released and the stream of Fed officials will start coming out of the woodwork.
Earnings:
After-Market: ATEX, AVGO, CMTL, CURV, GURE, MVLA, OXM, PLAY, SBNY, WINT, WRAP
Pre-Market: CANF, DLNG, JBL, KFY, KR, SIG, UPHL, VNCE, WLY
After-Market: ADBE, BYSI, EGIO, ITI, NICK, POWW, PROC, RFIL, RH, SFES, UONE
Sectors/Other Asset Classes:
Have a good night!
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