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“There is no risk-free path for monetary policy.” – Jerome Powell
Futures are pointing to a higher open this morning ahead of a busy morning for economic data and what has already been a busy overnight session for earnings and one that saw some wild moves in futures. With Asia down sharply overnight, S&P 500 futures were down well over 1% in the middle of the night, so thankfully most US investors were asleep to see that! As Europe opened for trading, sentiment started to rebound with markets in that region of the world posting mixed returns. Wherever futures are now, it’s unlikely they will stay right where they are for the remainder of the day. The market is attempting to find a new equilibrium point, and that process will keep markets volatile in the weeks ahead.
As mentioned above, the economic calendar is loaded this morning. Jobless claims were mostly inline, Durable Goods missed expectations, GDP was much stronger than expected while Personal Consumption was weaker. On the inflation front, the GDP Price Index was higher than expected at just under 7% while the Core PCE rose 4.9% which was in line with forecasts. The only two reports left on the calendar for today are Pending Home Sales and KC Fed Manufacturing which will both hit the tape at 10 AM.
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Yesterday’s market action showed broad-based declines across the board as the S&P 500 dropped more than 1.6% from 2 PM through the close and every sector dropped more than 0.65%. Sectors hardest hit in the after-meeting sell-off were some of the sectors you would most expect. The rate-sensitive Real Estate sector was the hardest hit falling 2.27%. Behind Real Estate, growth-oriented sectors like Technology, Consumer Discretionary, and Communication Services all reversed their gains falling more than 2%.
At the other end of the spectrum, defensive sectors like Utilities and Consumer Staples held up the best along with Financials which was the only other sector not to reverse at least 1% lower in the aftermath of Powell’s hawkish comments.
Try as they might to seek a port, if the Fed continues to guide to a more hawkish policy stance than markets anticipate at the time, there will little in the way of places for investors to hide in order to avoid at least some of the waves.
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