2023-04-17 16:14:00 ET
Summary
- Better-than-expected inflation reports during the week and an increasingly likelihood of recession are instead raising the prospect the Federal Funds Rate will reach a peak target range of 5.00-5.25% in May 2023.
- The CME Group's FedWatch Tool estimates a 83% chance the Fed will Federal Funds Rate by a quarter point to a target range of 5.00-5.25% at its upcoming meeting on 3 May (2023-Q2).
- The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 rebounded to +2.5% from the previous week's estimate of +1.5%.
The S&P 500 (Index:[[SPX]]) rose to end the trading week at 4137.64 , up 0.8% from the previous week's close.
The main factor in the week's market-moving headlines pointing to that outcome is the increasingly likelihood that the Federal Reserve's series of rate hikes that began back in March 2022 are much closer to being over. Better-than-expected inflation reports during the week and an increasing likelihood of recession are instead raising the prospect the Federal Funds Rate will reach a peak target range of 5.00-5.25% in May 2023, which investors are betting will transition into a series of rate cuts starting as early as July 2023.
We've updated the alternative futures chart to show a new redzone forecast range that runs from 10 April 2023 through 18 July 2023, during which we assume investors will transition their focus from the current quarter of 2023-Q2 to the more distant future quarter of 2023-Q3. We anticipate a higher volatility for stock prices may apply during this period, which we're indicating with a wider forecast range of ±4% rather than a typical ±3%.
Here's our weekly summary of those market-moving headlines we mentioned earlier.
Monday, 10 April 2023
- Signs and portents for the U.S. economy:
- Fed officials claim monetary policy did not cause bank failures, outsider thinks they might be done with rate hikes:
- BOJ officials to keep never-ending stimulus alive!
- ECB officials thinking about more rate hikes:
- Wall Street ends mixed with inflation data, earnings on tap
Tuesday, 11 April 2023
- Fed officials starting to have second thoughts about more rate hikes, think they'll be shrinking their balance sheet for several years:
- Fed's Goolsbee: Prudence, patience needed on rate hikes
- Fed's Williams says interest rate path is data dependent
- Fed's Harker wants interest rates to get above 5%, then sit
- Fed's Kashkari: Recession possible, but high inflation would be worse
- NY Fed report sees several more years of balance sheet contraction
- Bigger trouble, stimulus developing in China:
- IMF getting nervous about financial stability, doesn't think central banks should halt rate hikes to prevent more:
- Central bankers pausing rate hikes:
- ECB officials thinking inflation may become entrenched:
- Wall St ends mixed as inflation data comes into focus
Wednesday, 12 April 2023
- Signs and portents for the U.S. economy:
- Fed officials expected to deliver quarter-point rate hike in May 2023, less sure of next steps:
- Bigger trouble developing all over?
- BOJ officials to continue never-ending stimulus:
- ECB officials thinking about bigger rate hikes or pausing them:
- Wall Street closes lower after Fed minutes, inflation data
Thursday, 13 April 2023
- Signs and portents for the U.S. economy:
- Fed officials expected to hike rates one last time as next move:
- China export data confirms atmospheric CO2 signal, but doesn't dispel worries:
- Bigger trouble developing in U.K.:
- ECB officials thinking about quarter-point rate hike as next move:
- Wall St rallies to higher close as inflation data feeds Fed pause hopes
Friday, 14 April 2023
- Signs and portents for the U.S. economy:
- Some Fed officials thinking one more rate hike and done, others thinking they want more rate hikes, looking forward to "mild" recession:
- Slow rebound from zero-COVID lockdowns, bigger stimulus developing in China:
- New boss of BOJ officials says all's good with Japan's economy:
- ECB officials still excited about hiking rates:
- Wall St dips to lower close as rate hike bets firm, banks jump
For further details see:
The S&P 500 Rebounds As Reasons For Continuing Rate Hikes Lose Steam