Fed Meeting Provides Fireworks for the Market
Today's financial recap and tomorrow's financial outlook.
Interest rate markets were spooked after the summary of the FOMC's fed funds projections were released, which indicated that the members saw a faster pace of rate hikes in 2015. The median rate at the end of 2015 moved up to 1% from its prior 0.50%. Three- and five-year Treasury rates rose 14 and 16 basis points, respectively.
Equity markets were also spooked when Janet Yellen responded to a question in her press conference following the statement. In the FOMC's statement, it said that the committee saw the need to keep rates near zero for a considerable amount of time after the asset purchase program end. Yellen indicated in her answer that a considerable amount of time would be about six months, which was significantly faster than the market had been prepared for. The S&P 500 (INDEXSP:.INX) initially lost as much as 20 points after her comment, but it recovered much of these losses by the end of the session. The benchmark index closed down 0.61%. Banks showed relative strength versus the broad market weakness, closing up 0.55% as a group.
The US current account balance deficit shrank to the smallest level since 1999 at $81.1 billion. The drop was largely due to less dollar capital leaving the US and foreigners becoming net investors in the US.
Tomorrow morning, weekly jobless claims, the March regional Philadelphia manufacturing index, and February existing home sales will be released. Existing home sales, which make up about 85% of monthly home sales, are expected to remain unchanged from the prior month at an annual rate of 4.62 million. The Philadelphia manufacturing index will be the third piece of information we receive about March economic activity. Lastly, jobless claims are expected to trend hire to 325,000, closer to the 330,500 four-week moving average.
There are only a few events of note tomorrow in the rest of the world. Germany will release February producer prices and the Swiss National Bank will announces its bimonthly monetary policy decision. The Bank of Japan governor Haruhiko Kuroda will speak in Tokyo.
Two important earnings reports are scheduled for tomorrow: Nike (NYSE:NKE) and Lennar Homes (NYSE:LEN). Respectively, they are the first consumer and homebuilder to report earnings from the quarter passed. Nike's results will give a good idea of overseas sales and the recent strength in the US dollar. Other companies scheduled to report are ConAgra Foods (NYSE:CAG) and Silver Wheaton (NYSE:SLW).
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