Morning Minutes

Markets Reverse Course as Fed Decision Day Arrives




Throughout September, the upcoming Fed decision on interest rates and member forecasts on the future of US interest rates has been looming over world markets and investor sentiment. Today the highly anticipated news arrives at 2:00 pm EDT. The Fed is widely expected to hold rates steady today and with the June FOMC Fed Funds forecast suggesting the potential for one more rate hike this year, any hints toward an increase at the next meeting on November 2-3 would suggest an every-other-meeting pace for rate hikes.

The bigger question is whether the Fed thinks it could then be done or if tightening may continue into 2024 so the dot plot forecast could attract particular scrutiny this time around along with any hints or comments from Fed Chair Powell’s 2:30 pm EDT press conference. The US 10-year treasury note yield is holding steady near 4.35% this morning, suggesting investors are anticipating a neutral to hawkish tone to today’s announcements.

Investors have shown to be unwilling to make big commitments ahead of the Fed and this morning’s market reversals can be seen as a sign of this. US index futures, for example, are up 0.2%-0.3%, countering yesterday’s US index losses of 0.2%-0.3%. European markets are relatively stronger today with the Dax up 0.5% and the FTSE up 0.7%.

Similarly, energy markets, which had rallied earlier this week, are backsliding today with WTI down 0.8% and slipping back closer to $90.00/bbl, while Natural Gas is down 3.4%. The slide comes despite API announcing a 5.25 mmbbl drawdown in US weekly inventories last night, suggesting today’s pullback may be profit taking against recent gains or positioning ahead of the Fed. US DOE weekly oil inventories (street -2.2 mmbbls) are due at 10:30 am EDT.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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