Closing Stock Market SummaryThe majority of today's session was marked by lackluster action as investors awaited the FOMC policy decision at 2:00 p.m. ET followed by Fed Chair Powell's press conference at 2:30 p.m. ET. The main indices spent the morning oscillating near their flat lines, sporting only modest gains or losses, but ultimately closed the session sharply lower.
Briefly, the FOMC voted unanimously to raise the target range for the fed funds rate by 25 basis points to 4.75-5.00%. In turn, the language of the directive and the Summary of Economic Projections, which showed the Fed's median terminal rate of 5.10% unchanged from December, made it appear as if the Fed is going to entertain the idea of pausing its rate hikes soon.
That view prompted a knee-jerk, positive reaction in the stock market following the release of the directive; however, the positive price action shifted abruptly as Fed Chair Powell was speaking. Bids disappeared and stock prices fell prone to broad based selling interest that accelerated in the last hour of the session.
That retreat was hastened by Fed Chair Powell's acknowledgment that Fed participants do not see rate cuts this year. Separately, he also acknowledged his belief that the events in the banking system do not help the possibility of a soft landing for the economy.
All together, Mr. Powell did not sound especially hawkish nor dovish in his commentary. Importantly though, he did not sound particularly confident in the outlook either and we suspect that lack of confidence played a part as well in undermining investor confidence that led to the selling during his presentation.
Bank stocks found themselves under renewed selling pressure, with losses compounding during and after the press conference. The SPDR S&P Bank ETF (KBE) fell 5.2% and the SPDR Regional Bank ETF (KRE) fell 5.7%. To be fair, losses compounded for most stocks.
The S&P 500 retraced all of yesterday's gains and closed just above its 200-day moving average (3,934).
All 11 S&P 500 sectors closed with sizable losses ranging from 0.9% (information technology) to 3.6% (real estate). Another notable laggard was the financial sector, down 2.4%.
Treasuries settled the session with gains across the curve. The 2-yr note yield fell 20 basis points and the 10-yr note yield fell 11 basis points to 3.50%. The U.S. Dollar Index fell 0.9% to 102.38.
- Nasdaq Composite: +11.5% YTD
- S&P 500: +2.5% YTD
- S&P Midcap 400: -1.4% YTD
- Russell 2000: -1.9% YTD
- Dow Jones Industrial Average: -3.4% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Application Index rose 3.0% with refinancing applications increasing 5.0% and purchase applications rising 2.0%
- Weekly EIA Crude Oil Inventories showed a draw of 1.06 million barrels following a build of 1.55 million
Looking ahead to Thursday, market participants will receive the following economic data:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 204,000; prior 192,000), Continuing Claims (prior 1.684 mln), and Q4 Current Account balance (prior -$217.10 bln)
- 10:00 ET: February New Home Sales ( consensus 650,000; prior 670,000)
- 10:30 ET: Weekly natural gas inventories (prior -58 bcf)