Zacks Investment Ideas feature highlights: Chicago Mercantile Exchange

For Immediate Release

Chicago, IL - December 11, 2018 - Today, Zacks Investment Ideas feature highlights Features: Chicago Mercantile Exchange CME .

Can the Fed Stop the Bleeding?

With the markets capping an already poor week with another big slide on Friday, analysts have struggled to pinpoint the exact reasons for the selloff.

Trade tensions with China are a persistent issue even after the apparently successful meeting between President Trump and Chinese President Xi in Argentina last week. The arrest in Canada of a Chinese executive who now faces extradition to the US - presumably to face charges associated with violating international sanctions against Iran - has injected new uncertainty into the situation.

Over the past few months, the fear of rising interest rates has been a concern weighing on the markets as well, though those fears have abated somewhat with rates on the 2, 5, and 10- year treasuries falling sharply the past few weeks and recent statements from Federal Reserve Chairman Jerome Powell that were interpreted to mean that there are likely to be a fewer number of increases in short term rates than was previously expected.

Chairman Powell said in a prepared statement that, based on current data, he believes interest rates are "close to neutral." That language was a subtle yet significant departure from his earlier statements in which he described the overnight rate as "a long way from neutral," and which the markets had previously interpreted to mean a series of up to three more rate hikes could be expected. Some analysts had been planning for four 25 basis point increases over the next twelve months.

Prices for Fed Funds futures at the Chicago Mercantile Exchange now predict approximately a 15% chance that the overnight rate will rise by more than 50 basis points before the last Fed meeting in December of 2019.

So that should be good news for stocks, right?

Well unfortunately, it hasn't been lately.

Powell has attempted to be as transparent as possible, increasing the number of Q&A press conferences and making it clear that the board is focused firmly on economic data and does their best to ignore political considerations and short-term capital market impacts.

So what has that data been indicating?

Actually, it's been mostly very benign. Few numbers lately have been materially different from expectations.

Almost every release has suggested that the US economy is growing at a steady rate, but with little chance of overheating. The most recent employment report from the Bureau of Labor Statistics came in almost exactly as expected. The headline unemployment rate was unchanged at 3.7%, slightly fewer jobs were created than analysts had predicted and average hourly earnings continue to rise modestly, up 0.2% - exactly the same as the November report and one tenth of a percent less than the consensus estimate of 0.3%.

Strong employment coupled with wages that are rising modestly ought to be a perfect environment for economic growth and strong corporate earnings.

Yet stocks continue to sell off, with all of the major averages down more than 4% last week and once again below breakeven for 2018.

Though the Fed is still expected to raise the Fed Funds target rate 25 basis points at the December meeting, it's still unclear how the equity markets will interpret the move. Although rising rates tend to depress share prices because of increased borrowing costs for businesses and consumers, hawkish Fed action now might reassure the markets that economic activity remains healthy.

The chairmen's language after the December meeting will be especially important. If Powell and the board see evidence of continued steady growth, it will go a long way toward calming investor's jittery nerves and the forward P/E ratio of the S&P 500 at just 15X will start to look very attractive.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Follow us on Twitter:

Join us on Facebook:

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CME Group Inc. (CME): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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

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

In This Story


Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More