Will the Fed Raise or Not Raise Tomorrow 2023-05-03

Tom Gentile

Posted in
Big Picture

By: Tom Gentile
May 2nd, 2023

3 mins read

Here’s an understatement for you all… Today was not a good day for the Bulls.

Intraday the Dow was down more than 500 point.  Bank concerns are proving to still be an issue as the crisis Jamie Dimon of JP Morgan Chase said yesterday was under control may still NOT be.

There are concerns with the bank sector, combined with uneasiness regarding the debt ceiling — there is fear the U.S. may hit its borrowing limit sooner than expected.

The oil sector was the biggest drag on the markets today.  There is an anticipation that the US Dollar will see an increase with the Fed raising rates yet again tomorrow. This will likely have a negative impact on oil prices.

Couple this with the economic recovery in China not going so well, especially if the US defaults on its bonds. a tepid economic recovery in China and worries about the U.S. defaulting on its bonds continue to add to the uncertainty. With China being the largest importer of oil, the price of oil will be impacted.

Job Openings

The Labor Department reported job openings declined in March, hitting a nearly two-year low.

This can be looked at as a sign that the U.S. job market is loosening, which could possibly put less pressure on inflation.

A separate report from the Commerce Department at the same time came in showing orders for manufactured goods increased 0.9% in March,  That number is less than the estimate of 1.3%.

Info from CNBC.com also reports the level of job vacancies was the lowest total since April 2021. This cut the ratio of open jobs to available workers to 1.6 to 1.  The two years prior to that the ratio was around 2 to 1.

What does that mean for the Fed? According to Ronald Temple, chief market strategist at Lazard, the Fed may gain some comfort from the data, but may re affirm its stance it needs to do another rate hike tomorrow.

What are the Chances the Fed Raises Rates Tomorrow?

There is a website that gauges the likelihood the Fed will change the Federal target rate at upcoming FOMC meetings, according to interest rate traders?  It is found at the CME Group website.

Here is the link that will take one to a page showing the percentage chance of a rate hike and the current target Federal Funds Rate.

Fed Hike Rate Probabilities
Image provided by CME Group

Waiting on the Fed

Regardless of what the Fed does tomorrow, it will be just as important to hear what Chairman Powell’s commentary post the announcement is going to either ease concerns of trader/investors or further stoke the flames of fear of recession.

Let’s see what transpires and then set out to assess our assessment of market direction so we can then make what we deem are our appropriate options trading decisions. 

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