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Fed Raises Rates for 10th Time in Current Cycle, Signals Cautious Approach to Future Increases


Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

On Wednesday, S&P 500 futures and Dow Jones Industrial Average futures both fell, by 0.2% and 0.2%, respectively, while Nasdaq 100 futures remained flat, up 0.06%. The drop was attributed to the Federal Reserve’s decision to increase rates by 25 basis points and concerns over contagion in the regional bank sector. PacWest’s shares plummeted more than 50% after news broke that the California bank was assessing strategic options, including a possible sale. Other regional banks, such as Western Alliance and Zions Bancorporation, also experienced sharp declines.

During a post-meeting press conference, Fed Chair Jerome Powell indicated that the committee viewed inflation as unlikely to decrease rapidly, making it inappropriate to cut rates. Stocks closed lower on Wednesday, with the Dow dropping 0.8%, the S&P 500 losing 0.7%, and the Nasdaq Composite declining by approximately 0.5%. Upcoming key economic reports, including Thursday’s initial jobless claims and Friday’s April payrolls report, will help inform the Fed’s next steps.

In addition to economic reports, investors will be closely watching several companies’ earnings releases, including Moderna’s results before the opening bell on Thursday, and after-market earnings from Apple, Lyft, DraftKings, and Coinbase.

Data by Bloomberg

On Wednesday, all sectors experienced a 0.7% decrease, with the energy sector seeing the largest decline of 1.92%. The financial sector followed closely behind, falling by 1.19%. The information technology and materials sectors also experienced significant declines of 0.83% and 1.11%, respectively. Other sectors, such as healthcare, communication services, and utilities, saw smaller declines ranging from 0.11% to 0.31%. The consumer staples and real estate sectors both fell by 0.79% and 0.59%, respectively, while the consumer discretionary and industrials sectors saw declines of 0.71% and 0.38%, respectively.

Major Pair Movement

On Wednesday, the US dollar fell against major currencies including the euro, yen, and sterling following the Federal Reserve’s meeting where Chair Jerome Powell raised the bar for further tightening to combat high inflation despite the restrictive policy and increasing financial and economic risks. Powell reiterated that inflation remains high and the labor market tight, leaving the Fed’s policy options open. The ISM non-manufacturing index was large as forecast, with prices paid remaining high and new orders likely driven by export orders surging.

Investors are now awaiting Friday’s employment report to assess whether ADP’s report of 296k jobs in April versus March’s 142k is valid or whether other factors like falling job openings and rising layoffs point to a decline in non-farm payrolls forecasted at 180k. In addition, jobless claims are set to be released on Thursday, while the European Central Bank is expected to hike rates twice by year-end.

Meanwhile, the dollar index and Treasury yields dropped to new session lows after the Fed replaced the line suggesting further rate hikes with watching incoming data to determine if more hikes “may be appropriate.” Sterling managed a 0.78% gain despite coming off 11-month highs, while EUR/USD rose by 0.56% after approaching April’s trend highs. There was also news from the Kremlin claiming Ukraine had attempted to kill President Putin in a drone attack, introducing a new risk curve ball.

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
EURMain Refinancing Rate20:153.75%
EURMonetary Policy Statement20:15
USDUnemployment Claims20:30239K
EURECB Press Conference20:45
CADBOC Gov Macklem Speaks00:50 (5th May)51.8