It's Fed Day and Here's What We're Watching
Plus, we'll be looking at earnings from Micron, KB Home, and checking on Reddit's IPO.
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* It’s Fed Day, and here’s what we’re watching when it comes to Powell and the Fed
* Also, this afternoon – earnings from Micron and KB Home
* Reddit’s IPO looms
The market’s attention will be focused primarily on the outcome of today’s Fed meeting, which will generate a fresh policy statement and an updated set of economic projections at 2 pm ET.
While no change in policy is expected today, the market will be reading Fed tea leaves for clues as to when the central bank may begin a long expected rate-cutting cycle. Complicating that timing, recent metrics, and other data, including copper, lumber, oil, and gas prices, reveal inflation pressures persist – we discussed some of that yesterday.
My expectation is that will lead to a sobering tone from the Fed and Fed Chair Powell, with the Fed reiterating it will not relent until its job to bring inflation toward its 2% target is achieved. However, with nine months left in 2024 and four policy meetings in 2H 2024, I do not expect the Fed’s updated economic projections to show fewer rate cuts than the three it telegraphed back in December.
Those forecasts, however, are likely to show upward revisions for GDP and inflation figures at least for this year. That will signal the Fed keeping its options open when it comes to rate cuts, but I also expect Powell to maintain that the central bank does indeed remain “data dependent.”
The set of Economic Projections to watch will be one we get in June. I say this because we will have that much more data in hand, but with four – really three if we exclude the September meeting given its proximity to the 2024 presidential election – it will give us a clearer picture of the likely number of rate cuts for this year.
Supporting my view that June will be a big month for monetary policy, European Central Bank (ECB) chief Christine Lagarde shared that June is the month in which ECB policymakers will consider bringing interest rates lower. In her own words, “By June we will have a new set of projections that will confirm whether the inflation path we foresaw in our March forecast remains valid.”
My thinking is that means that, at least for now, Fed rate cut expectations will need to slide into 3Q 2024. Even though the upward GDP revisions that we expect to see support the current market narrative, we could see some market turbulence as expectations for 2H 2024 are reevaluated. As I discussed in today’s Video, we have our shopping list and cash on hand with eyes on key technical support levels.
After the Fed - Micron, KB Home, and Reddit
This afternoon also brings a few other key items that I’ll be watching. These include quarterly results from Micron MU, and its update on several end markets, including data center, PCs, and smartphone.
Inside earnings from KB Home KBH, I’ll be watching the trend in home prices both in its backlog and new orders.
And this afternoon, we could see Reddit (RDDT) price its IPO offering. How that offering prices relative to the target range and how RDDT shares trade in the coming days will tell us to what degree the IPO window will reopen. That is something we are watching closely given our positions in Morgan Stanley MS and Bank of America BAC.
At the time of publication, TheStreet Pro Portfolio was long MS, BAC.
