Wednesday afternoon (2:00 pm ET), the Fed will issue its March rate policy decision, expected to be more or less a reiteration of January's pause, holding the federal funds target rate at 4.25-4.50%, considered by veteran bond dealers to be reasonable, though opinions differ.
With inflation cooling, the 10-year note stabilizing around 4.30%, roughly the same as overnight federal funds, new age economists, inbued with years of ultra-low and even negative rates, consider anything above the rate of inflation to be excessive, thus the endless cacophony of cooing for lower rates sooner than what the Fed is offering, which is, ostensibly, one or two rate cuts this year, with the distinct possibility of none at all, barring a recession.
To be fair, the 10-year at four to five percent is historically low and the fact that the yield curve is approaching the contour of a flat line, indicates little more than a sluggish environment where neither lenders nor borrowers are pleased.
Today's FOMC statement will be closely analyzed and dissected for any clues to the Fed's intentions. Quarterly projections by Fed members and Chairman Powell's press conference will also be scrutinized by analysts and the financial media. Powell's question and answer period may be more interesting than usual given the range of issues the Fed faces, from an inflation-deflation debate to recession possibility, unemployment and a sliding stock market.
More than likely, Powell will be tight-lipped on most topics, claiming data-dependency and a wait-and-see approach.
With the market opening on the positive side, both camps of bulls and bears see opportunity. Bulls may be bargain-hunting while bears still consider stocks overvalued and any gains more potential for downside risk. Lately, any attempts by the market to rally significantly have been quickly quashed as investors have become more and more non-committal in opening new positions, seeking rather to shed losers and trim holdings, taking outsized profits to the bank.
Gold continues to ratchet higher, setting another record at $3,052.40 earlier this morning on the COMEX. Silver continues wavering near recent highs, with the hurdles of $34.50 and $35.00 significant obstacles given the extreme levels of shorting of the second metal.
WTI crude oil continues floundering about between $65 and $68, a reasonable range given the supply-demand dynamics currently in play. Supply being more than adequate and OPEC remaining at lower production levels, President Trump's calls to "drill, baby, drill," may be falling on deaf ears.
Bitcoin appears to have based at $80,000. Since making a double-bottom a week ago, upside movement has been limited. There are indications that a drop below $80,000 would trigger a rapid sell-off of another $10,000, with modest support around $70,000. Bitcoin's rally from $70,000 to $90,000 took just 10 days (November 4 - 14, 2024) which means buying was thin. There's also a good amount of fresh money in play from mid-November to mid-February that is currently held at a loss. When buyer's remorse becomes a call to action, the pace of selling could overwhelm the high-sided "hodlers" as diamond hands turn to coal.
With stocks hitting the high road prior to what's expected to be a rather mundane Fed announcement, the potential for an afternoon swoon becomes increasingly possible. Unless Chairman Powell indicates some form of relief on the way or the infamous dot plots offer more downside direction on rates, stock marketeers may be once more disappointed.
At the Close, Tuesday, March 18, 2024:
Dow: 41,581.31, -260.32 (-0.62%)
NASDAQ: 17,504.12, -304.55 (-1.71%)
S&P 500: 5,614.66, -60.46 (-1.07%)
NYSE Composite: 5,614.66, -60.46 (-1.07%)
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