Daily Markets: Fed Funds Futures Still Pricing in Cuts Despite Powell's Comments

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed after yesterday’s post-Fed meeting meltdown: Japan’s Nikkei declined 0.17%, India’s SENSEX fell 0.50% and Australia’s ASX All Ordinaries dropped 0.72% while South Korea’s KOSPI rose 0.31% and China’s Shanghai Composite and Taiwan’s TAIEX gained 0.64% and 0.66%, respectively. Hong Kong’s Hang Seng had a strong day, up 2.34% led by names like Tencent and Alibaba as well as Real Estate and financial names. European markets are down across the board except for Hungary and Turkey in midday trading.

U.S. equity futures point to a positive market open later this morning as investors further digest the Fed’s latest move with monetary policy and prospects for no rate cuts in 2023 as it looks to recover from yesterday’s late-day losses. While the Fed indicated it may be nearing the end of its rate hiking cycle, Fed Chair Powell noted that will hinge on upcoming inflation data, labor market tightness, and the degree to which tighter credit standards following recent bank failures impede the economy.

Despite Powell reiterating there are no rate cuts in the Fed’s base case for the economy, as of this morning the CME FedWatchTool continues to show the market expects not one but three rate cuts before the end of 2023. As the digestion of Fed's comments continue, we could see additional changes in the futures curve today and tomorrow as analysts and economists update their forecasts. Based on what it is showing this morning, however, it would appear the market continues to hope for rate cuts that may not materialize.

Data Download

International Economy

The Swiss National Bank announced it is tightening its monetary policy further and is raising the SNB policy rate by 0.5 percentage points to 1.5%.

At 8 AM ET, the Bank of England will announce its latest interest rate decision and the central bank is expected to increase rates by 25 basis points to 4.25%.

Domestic Economy

In addition to the usual weekly Thursday data that is jobless claims, both initial and continuing, at 10 AM ET February New Home Sales data will be published. The consensus forecast calls for 650K homes on an annualized basis, down from 670K in January.

Markets

The market’s certainty about the Fed moving rates 25 basis points was apparently justified. What it did not expect was the comments Chairman Powell made about his not seeing any rate cuts through the rest of 2023 and it showed. Treasury Secretary Janet Yellen’s statement that the U.S. is not currently working on “blanket insurance” for bank deposits in her testimony to Congress added further to traders’ dour mood.

The Dow, S&P 500, and Nasdaq Composite all fell 1.60% to 1.65% and the Russell 2000 dropped 2.83% by the end of trading. Sectors were down across the board, with Real Estate (-3.65%), Financials (-2.32%), and Consumer Discretionary (-2.23%) taking the biggest hits. In individual names, Match Group (MTCH) rose 2.27% yesterday despite an earlier shareholder lawsuit that had been filed against them related to what is perceived to be a failure of management to execute stated product development plans.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -3.37%
• S&P 500: 2.54%
• Nasdaq Composite: 11.50%
• Russell 2000: -1.92%
• Bitcoin (BTC-USD): 65.64%
• Ether (ETH-USD): 45.09%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Accenture (ACN), Darden Restaurants (DRI), FactSet (FDS), and General Mills (GIS) are expected to report their latest quarterly results.

Top and bottom line results at KB Home (KBH) came in ahead of consensus forecasts for its February quarter. The company’s deliveries fell 3% YoY to 2,788 but that was mitigated by the 2% increase in the average selling price to $494,500. KB tightened its 2023 revenue forecast to $5.20-$5.90 billion vs its prior guidance of $5.0-$6.0 billion, which includes an average selling price of $480,000-$490,000.

Chewy (CHWY) reported January quarter results that topped consensus expectations but the shares are moving lower this morning following softer than guidance. The company’s margins are also expected to be under pressure as the company expands its footprint internationally.

Veradigm (MDRX) revised its financial guidance for fiscal 2023, now expecting revenue in the range of $615-$635 million vs. $625-$645 million previously. When the company files its 2022 10-K filing, it also expects to re-state its 2021 results.

Boeing (BA) and Japan Airlines have finalized an order for 21 super-efficient 737-8 jets.

Panera Bread is piloting Amazon's (AMZN) Amazon One palm-scanning technology in St. Louis and hopes to expand the trial to a dozen or more locations over the next few months.

Toshiba (TOSBF) has accepted a $15.3 billilon buyout offer from a consortium of Japanese firms led by domestic private equity firm Japan Industrial Partners Inc.

IPOs

Golden Heaven Group (GDHG), and Shengfeng Development (SFWL) are expected to price their IPOs this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Manchester United (MANU), Oxford Industries (OXM), and Yamana Gold (AUY) are slated to report their quarterly results after equities markets close for the day and the week. Those looking for more on which companies are reporting when should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, March 24

• Japan: Flash Manufacturing PMI - March
• UK: Retail Sales - February
• Eurozone: Flash Manufacturing PMI – March
• US: Durable Orders - February
• US: S&P Global Flash Manufacturing & Services PMIs - March

Thought for the Day

“There is nothing worse than a sharp image of a fuzzy concept.” ― Ansel Adams

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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