By: Tom Gentile
on May 19th, 2023
Friday saw the end of the week for the financial markets listening in on a conference with Fed Chair Jerome Powell at the “Perspectives on Monetary Policy” panel in Washington, D.C. hosted by the central bank.
All the Fed chairs are not unanimous in what they feel is the best approach in getting their target rate for inflation down to 2%. There are some State Fed Chairs that seem to lean towards continuing to raise rates now and others that feel a more cautious approach is appropriate.
The markets, based on market pricing and data from the CME Group, thus far this Friday morning are showing a 35% likelihood of the Fed approving another rate hike in June. Reports show the markets are pricing in two more 24-basis point cuts this year, but none for 2024, (for now).
The Fed and thus the markets are faced with an economy that remains resilient along with the labor market, which Thursday data showed initial jobless claims coming at 242,000 vs expectations of 255,000.
Mind you, inflation has come off its highs of last year, but is still above the 2% target the Fed wants to see.
Regarding the pace in which we can expect the fight against inflation and the bringing it down to that target 2%, Chairman Powell said he and his colleagues anticipate it being a slow progression.
Whether or not the Fed decides to skip or pause a rate hike in June, they say they are going to have to see all the data at the June meeting before making that decision.
The markets are selling off thus far this Friday morning and we will see how the day and the week ends up, but it seems there is still more concern over the debt ceiling discussion that is the more pressing concern.
The markets don’t like uncertainty as we can see, but when there was a sniff that congress wont default earlier in the week the markets had a very bullish day that day.
A Technical View on the Markets and what one Might Expect
On the chart image of Figure 1, we have a horizontal line drawn in at 415 as that looks like a price resistance for SPY that was intact from mid-April until yesterday’s day of trade.
SPY traded and closed above the 415 price.
Even though SPY is trading lower today it is holding above the 415-price resistance and so long as it doesn’t trade and close under that we could see that 415-resistance become new 415-support.
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