Latest news with #Fedwatch
Yahoo
07-04-2025
- Business
- Yahoo
Wall Street expects the Fed to rescue the economy from Trump tariffs, but an emergency rate cut now could spark more panic, analyst warns
Investors are pricing in more rate cuts this year from the Federal Reserve as President Donald Trump's aggressive tariffs spark recession fears, and are even seeing the possibility of a cut coming before a scheduled meeting. But emergency easing now could set off more panic rather than calm nerves, Bankrate's Greg McBride says. President Donald Trump's aggressive tariffs have Wall Street increasingly expecting a recession and more easing from the Federal Reserve, but an analyst warned an emergency cut could set off more panic. Economists at JPMorgan have sharply downgraded their economic forecast for this year due to the tariffs and now see GDP shrinking 0.3% instead of growing 1.3%. At the same time, Trump administration officials and the president himself have shown no signs of backing down from their trade war, even as the stock-market selloff wipes out $6 trillion in market cap. On Monday, Trump doubled down on his message that Americans must endure some pain to achieve his goal of rebalancing trade relations. "Don't be Weak! Don't be Stupid! Don't be a PANICAN (A new party based on Weak and Stupid people!). Be Strong, Courageous, and Patient, and GREATNESS will be the result!' he wrote on Truth Social. But the mood on Wall Street is so despondent that CME's Fedwatch tool briefly priced in 125 basis points of rate cuts this year, before paring it back to 100 points, or the equivalent to four quarter-point cuts. That's up from views for three cuts last week and just two earlier this year, with some even predicting that the Fed would hold off completely in 2025. According to Bloomberg, data on rate-swap contracts indicates investors also see nearly 40% odds the Fed will cut rates by 25 basis points next week—before the next scheduled meeting on May 7. But Greg McBride, Bankrate's chief financial analyst, warned that could cause more harm than good. "Unless the functioning of financial markets, such as the flow of credit, begins to seize up, there isn't much the Fed can do," he wrote in a note Sunday night. "An emergency rate cut would do little and could fuel further panic. Any boost to sentiment could also be fleeting amid such uncertainty." Still, McBride acknowledged the stock market meltdown since Thursday is "unique, and is particularly unsettling," but cautioned investors should resist the temptation for "knee-jerk" selling. For his part, Fed Chairman Jerome Powell has signaled the central bank is in no rush to adjust monetary policy. That's as the Fed must fight inflation, which would be fueled by tariffs, and support the job market. On Friday, he said Trump's tariffs were significantly steeper than expected and would likely push inflation higher and slow economic growth, striking a more hawkish tone after previously suggesting tariffs might have a more transitory effect on inflation. 'It feels like we don't need to be in a hurry. It feels like we have time,' Powell said. 'Inflation is going to be moving up, and growth is going to be slowing, but to me it's not clear at this time what the appropriate path for monetary policy is going to be. We're going to need to wait and see how this plays out before we make those adjustments.' This story was originally featured on Sign in to access your portfolio
Yahoo
21-03-2025
- Business
- Yahoo
Markets get respite from ‘Trumpcession' fears as Federal Reserve keeps two interest rate cuts on the table
Fed Chair Jerome Powell repeated the word 'uncertainty' at least 10 times when talking about the central bank's economic outlook. The Fed slightly lowered its growth projection and raised its forecast for inflation, but investors appeared more convinced the Fed is particularly attuned to concerns about growth. Markets breathed a sigh of relief on Wednesday after the Federal Reserve kept rates steady as expected but signaled that two cuts remain on the table this year. Stocks jumped after Fed Chair Jerome Powell said the economy remains strong, though he emphasized the central bank will adopt a wait-and-see approach when it comes to the economic agenda of President Donald Trump. The day offered some solace to stocks, which have tumbled amid Trump's on-again, off-again tariff threats and growing fears of a recession, as the S&P 500 and tech-heavy Nasdaq Composite closed up 1.1% and 1.4%, respectively. Both indexes had recently entered correction territory after dropping more than 10% from all-time highs in mid-February, wiping out gains from the market rally after Trump's election win in November. For the Fed, 'uncertainty' was the word of the day, said Chris Diaz, a partner and co-head of the global taxable fixed income team at Baltimore-based investment firm Brown Advisory, who noted Powell used the term at least 10 times. Just as they did in December, Fed policymakers penciled in a median of two interest rate reductions in the famous 'dot plot,' which shows where individual officials see rates headed. Eight of the 19 participants had rates unchanged or being cut only once, however, up from just four who maintained that hawkish posture at the end of last year. Nonetheless, Diaz said, investors appeared more convinced the Fed is particularly attuned to concerns about growth. 'That, for a riskier asset class [like] stocks, I think, is a much more welcome message than, 'We're not going to do anything, or maybe we'll raise rates because we don't know what's going to happen to inflation,'' Diaz said. Hedge fund and ETF manager Jay Hatfield, the CEO of Infrastructure Capital Advisors, said the market also reacted to the Fed's announcement that it would slow the pace of so-called quantitative tightening, or the process of offloading assets from the central bank's balance sheet. Many investors interpret that (wrongly, he argued) as a dovish signal, he said. In his press conference, Powell said the move was simply a response to increased tightness in money markets. 'This action has no implications for our intended stance of monetary policy and should not affect the size of our balance sheet over the medium term,' he said. Treasury bonds also rallied slightly despite the Fed confirming it would not lower the federal funds rate, currently sitting between 4.25% and 4.5%, which banks charge when lending to their peers overnight. The market is pricing in two to three cuts in 2025, according to the CME Group's Fedwatch tool. If they do come to pass, however, investors will hope they are 'good news' cuts enabled by easing inflation concerns and not an emergency response to a so-called Trumpcession. Many investors believed the new administration would prioritize presumably pro-growth (and potentially inflationary) aspects of Trump's agenda like tax cuts and deregulation. Instead, the new administration appears fixated on overhauling America's trade relations, and the jury is out whether tariffs will ultimately reignite inflation or slow growth. Then there's the worst-case scenario of stagflation. Powell, meanwhile, suggested the broad economic impact of the mass government layoffs initiated by Elon Musk's Department of Government Efficiency also remains unclear. 'As growth prospects falter and inflation remains sticky, we should expect investors to get more worried about stagflation,' Jeffrey Roach, chief economist for broker-dealer LPL Financial, wrote in a note after the Fed's announcement. Goldman Sachs recently downgraded its GDP growth projection to 1.7%, the first time the investment bank's forecast has fallen below Wall Street's consensus in two and a half years, while raising expectations for inflation. Fed officials, meanwhile, also trimmed their growth projection to 1.7%, down from 2.1% in December, and raised the forecast of its preferred inflation metric from 2.5% to 2.7%—above the central bank's 2% target. Of course, not all market participants are celebrating the Fed's decision. Hatfield believes the Fed has kept monetary policy overly tight amid what he sees as clear signs of economic weakness. He compared the Fed's current hesitancy to cut rates to the central bank's slow response when inflation hit four-decade highs in the aftermath of the COVID-19 pandemic, which has been heavily criticized. But David Andolfatto, a former senior VP at the Federal Reserve Bank of St. Louis, said the Fed faces an impossible task trying to please markets. Lambasting the Fed for being cautious amid tremendous uncertainty, he said, is like calling out a driver who chooses to take it slow on the roads during a fierce storm. 'You can't see the potholes,' Andolfatto, who now chairs the University of Miami's economics department, said Tuesday. 'You got to slow down. You might turn right, you might turn left, you might make a mistake. But, I mean, you're trying to do the best that you can given the lack of clarity in the storm.' Investors are hoping the clouds will clear up soon. This story was originally featured on Sign in to access your portfolio
Zawya
20-03-2025
- Business
- Zawya
Futures tick up after Fed holds rates steady
Wall Street futures climbed on Thursday as investors drew confidence from the Federal Reserve's signaling of more interest rate cuts this year despite uncertainties stemming from U.S. trade policies. The Fed opted to maintain current interest rates on Wednesday, a move widely anticipated by the market, but reaffirmed its forecast for two 25 basis point reductions by the year-end. However, the central bank revised its economic outlook, projecting slightly reduced growth and increased inflation for the year, alongside a modest uptick in the unemployment rate by 2025. "I mean it's just ... really hard to know how this is going to work out," Fed Chair Jerome Powell told a press conference after a two-day policy meeting. Market participants are currently factoring in 63 basis points of easing from the Fed this year, placing odds of 25 bps rate cut in June at 60%, according to CME Group's Fedwatch tool. In the previous session, the major stock indexes gained, with the S&P 500 advancing 1%, the tech-heavy Nasdaq climbing 1.4% and the Dow gaining nearly 1%. The CBOE volatility index, also known as Wall Street's fear gauge, touched a nearly one-month low in the previous session. At 5:40 a.m. ET, S&P 500 E-minis were up 8.5 points, or 0.15%, with 99,371 contracts changing hands. Nasdaq 100 E-minis were up 32.5 points, or 0.16% and Dow E-minis were up 39 points, or 0.09%. Despite Wall Street seeing gains in three out of the past four sessions, the S&P 500 remains down 3.5% so far this year and the Nasdaq lower 8%. The indexes' declines erase all gains since President Donald Trump's November election, underscoring concerns over slowing economic growth and trade tensions fueled by Trump's aggressive trade policies. "The potential downside risks to growth and upside risks to inflation, in part from tariffs and trade policy uncertainty, creates a complication for the monetary policy outlook," said Ryan Wang, U.S. economist at HSBC. Gold prices hit a new record high, another sign of lingering investor worries. A key focus for the markets will be the upcoming implementation of new reciprocal and sectoral tariffs, slated to take effect on April 2. Growth stocks ticked up in premarket trade, with Nvidia rising nearly 1%. Meta, and Microsoft all gained above 0.2% each. (Reporting by Pranav Kashyap in Bengaluru; Editing by Maju Samuel)
Yahoo
20-03-2025
- Business
- Yahoo
Futures tick up after Fed holds rates steady
(Reuters) - Wall Street futures climbed on Thursday as investors drew confidence from the Federal Reserve's signaling of more interest rate cuts this year despite uncertainties stemming from U.S. trade policies. The Fed opted to maintain current interest rates on Wednesday, a move widely anticipated by the market, but reaffirmed its forecast for two 25 basis point reductions by the year-end. However, the central bank revised its economic outlook, projecting slightly reduced growth and increased inflation for the year, alongside a modest uptick in the unemployment rate by 2025. "I mean it's just ... really hard to know how this is going to work out," Fed Chair Jerome Powell told a press conference after a two-day policy meeting. Market participants are currently factoring in 63 basis points of easing from the Fed this year, placing odds of 25 bps rate cut in June at 60%, according to CME Group's Fedwatch tool. In the previous session, the major stock indexes gained, with the S&P 500 advancing 1%, the tech-heavy Nasdaq climbing 1.4% and the Dow gaining nearly 1%. The CBOE volatility index, also known as Wall Street's fear gauge, touched a nearly one-month low in the previous session. At 5:40 a.m. ET, S&P 500 E-minis were up 8.5 points, or 0.15%, with 99,371 contracts changing hands. Nasdaq 100 E-minis were up 32.5 points, or 0.16% and Dow E-minis were up 39 points, or 0.09%. Despite Wall Street seeing gains in three out of the past four sessions, the S&P 500 remains down 3.5% so far this year and the Nasdaq lower 8%. The indexes' declines erase all gains since President Donald Trump's November election, underscoring concerns over slowing economic growth and trade tensions fueled by Trump's aggressive trade policies. "The potential downside risks to growth and upside risks to inflation, in part from tariffs and trade policy uncertainty, creates a complication for the monetary policy outlook," said Ryan Wang, U.S. economist at HSBC. Gold prices hit a new record high, another sign of lingering investor worries. A key focus for the markets will be the upcoming implementation of new reciprocal and sectoral tariffs, slated to take effect on April 2. Growth stocks ticked up in premarket trade, with Nvidia rising nearly 1%. Meta, and Microsoft all gained above 0.2% each.
Reuters
20-03-2025
- Business
- Reuters
Futures tick up after Fed holds rates steady
Summary Companies March 20 (Reuters) - Wall Street futures climbed on Thursday as investors drew confidence from the Federal Reserve's signaling of more interest rate cuts this year despite uncertainties stemming from U.S. trade policies. The Fed opted to maintain current interest rates on Wednesday, a move widely anticipated by the market, but reaffirmed its forecast for two 25 basis point reductions by the year-end. Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. However, the central bank revised its economic outlook, projecting slightly reduced growth and increased inflation for the year, alongside a modest uptick in the unemployment rate by 2025. "I mean it's just ... really hard to know how this is going to work out," Fed Chair Jerome Powell told a press conference after a two-day policy meeting. Market participants are currently factoring in 63 basis points of easing from the Fed this year, placing odds of 25 bps rate cut in June at 60%, according to CME Group's Fedwatch tool. In the previous session, the major stock indexes gained, with the S&P 500 (.SPX), opens new tab advancing 1%, the tech-heavy Nasdaq (.IXIC), opens new tab climbing 1.4% and the Dow (.DJI), opens new tab gaining nearly 1%. The CBOE volatility index (.VIX), opens new tab, also known as Wall Street's fear gauge, touched a nearly one-month low in the previous session. At 5:40 a.m. ET, S&P 500 E-minis were up 8.5 points, or 0.15%, with 99,371 contracts changing hands. Nasdaq 100 E-minis were up 32.5 points, or 0.16% and Dow E-minis were up 39 points, or 0.09%. Despite Wall Street seeing gains in three out of the past four sessions, the S&P 500 remains down 3.5% so far this year and the Nasdaq lower 8%. The indexes' declines erase all gains since President Donald Trump's November election, underscoring concerns over slowing economic growth and trade tensions fueled by Trump's aggressive trade policies. "The potential downside risks to growth and upside risks to inflation, in part from tariffs and trade policy uncertainty, creates a complication for the monetary policy outlook," said Ryan Wang, U.S. economist at HSBC. Gold prices hit a new record high, another sign of lingering investor worries. A key focus for the markets will be the upcoming implementation of new reciprocal and sectoral tariffs, slated to take effect on April 2. Growth stocks ticked up in premarket trade, with Nvidia (NVDA.O), opens new tab rising nearly 1%. Meta (META.O), opens new tab, (AMZN.O), opens new tab and Microsoft (MSFT.O), opens new tab all gained above 0.2% each.
