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Markets Close At/Near Lows on 50 bps Hike Speculation
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Whatever optimism kicked off this trading day so long ago dashed against the rocks upon Fed Chair Jay Powell’s testimony before the Senate Banking Committee this morning. In expressing his disappointment with how economic metrics have played out in recent weeks, Powell left the door open to a higher interest rate hike (to 50 bps from 25 previously) at the next Fed policy meeting two weeks from tomorrow.
Powell said he is keeping an eye on, in particular: Goods, Housing and Services data between now and the meeting. In Goods, he sees disinflation already underway and looks for that to continue. For Housing, he expects lagging data will eventually lead to lower lease prices. Services he considers the driving force of inflation today, and said, “We’ll be watching that very carefully.” Services account for 56% of consumer spending currently.
Thus, we now see nearly a 50% probability (according to FedWatch Tool) that the Fed puts its foot back on the gas and moves from a 25 bps hike last time around to 50 bps on March 22nd. It also disabused market participants of the notion — assuming they were paying attention — that we might enjoy a “no landing” down the road: the Fed is determined to tighten the screws until we do see the stickier parts of inflation begin to cry “uncle.”
Therefore, we see a four-day winning streak on the Dow come to a fairly gnarly end, finishing at session lows to -574 points, -1.72%. The S&P 500, which only yesterday looked pretty resilient above 4K, stumbled below it, -1.53% to 3986. The Nasdaq’s pullback was a bit more muted, -1.24%, while the Russell 2000, which notably underperformed the other top indices last year, “won” the day, only falling -1.11%.
Assuming we’re all interested in seeing Powell & Co. put a cork in cranking up interest rates sooner than later, we can now start actively rooting for a big downshift in jobs gains this week: tomorrow morning brings us ADP (ADP - Free Report) private-sector payroll results for February, and Friday ushers in nonfarm payrolls and a new Unemployment Rate. Estimates are for 205K and 225K, respectively; sub-200K prints on either of these might be a hopeful sign the Fed may give pause to its new hawkish stance.
Consumer Price Index (CPI) data is out next week, and there we’ll be looking at the follow-up to a +6.4% Inflation Rate (CPI headline, year over year) to subside more than the 10 bps increment it posted a month ago. A half-point would be more like it, so a 5-handle on year-over-year CPI would assist this mission to cool the Fed’s approach. On both CPI and jobs data, lowered revisions to previous months’ totals would also be welcome.
Cybersecurity staple Crowdstrike (CRWD - Free Report) shares are up +7% on its Q4 earnings report after the closing bell today: earnings of 47 cents per share beat the Zacks consensus by 4 cents per share, with sales in the quarter of $637 million easily surpassing the $624.7 million analysts were projecting. Annualized recurring revenues also topped expectations: +48% year over year from +45% estimated. Current year revenue estimates have been raised to $3 billion from $2.23 billion originally thought. The company has no negative earnings surprises in the four years since the company’s IPO in 2019.
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Markets Close At/Near Lows on 50 bps Hike Speculation
Whatever optimism kicked off this trading day so long ago dashed against the rocks upon Fed Chair Jay Powell’s testimony before the Senate Banking Committee this morning. In expressing his disappointment with how economic metrics have played out in recent weeks, Powell left the door open to a higher interest rate hike (to 50 bps from 25 previously) at the next Fed policy meeting two weeks from tomorrow.
Powell said he is keeping an eye on, in particular: Goods, Housing and Services data between now and the meeting. In Goods, he sees disinflation already underway and looks for that to continue. For Housing, he expects lagging data will eventually lead to lower lease prices. Services he considers the driving force of inflation today, and said, “We’ll be watching that very carefully.” Services account for 56% of consumer spending currently.
Thus, we now see nearly a 50% probability (according to FedWatch Tool) that the Fed puts its foot back on the gas and moves from a 25 bps hike last time around to 50 bps on March 22nd. It also disabused market participants of the notion — assuming they were paying attention — that we might enjoy a “no landing” down the road: the Fed is determined to tighten the screws until we do see the stickier parts of inflation begin to cry “uncle.”
Therefore, we see a four-day winning streak on the Dow come to a fairly gnarly end, finishing at session lows to -574 points, -1.72%. The S&P 500, which only yesterday looked pretty resilient above 4K, stumbled below it, -1.53% to 3986. The Nasdaq’s pullback was a bit more muted, -1.24%, while the Russell 2000, which notably underperformed the other top indices last year, “won” the day, only falling -1.11%.
Assuming we’re all interested in seeing Powell & Co. put a cork in cranking up interest rates sooner than later, we can now start actively rooting for a big downshift in jobs gains this week: tomorrow morning brings us ADP (ADP - Free Report) private-sector payroll results for February, and Friday ushers in nonfarm payrolls and a new Unemployment Rate. Estimates are for 205K and 225K, respectively; sub-200K prints on either of these might be a hopeful sign the Fed may give pause to its new hawkish stance.
Consumer Price Index (CPI) data is out next week, and there we’ll be looking at the follow-up to a +6.4% Inflation Rate (CPI headline, year over year) to subside more than the 10 bps increment it posted a month ago. A half-point would be more like it, so a 5-handle on year-over-year CPI would assist this mission to cool the Fed’s approach. On both CPI and jobs data, lowered revisions to previous months’ totals would also be welcome.
Cybersecurity staple Crowdstrike (CRWD - Free Report) shares are up +7% on its Q4 earnings report after the closing bell today: earnings of 47 cents per share beat the Zacks consensus by 4 cents per share, with sales in the quarter of $637 million easily surpassing the $624.7 million analysts were projecting. Annualized recurring revenues also topped expectations: +48% year over year from +45% estimated. Current year revenue estimates have been raised to $3 billion from $2.23 billion originally thought. The company has no negative earnings surprises in the four years since the company’s IPO in 2019.
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