June 15, 2022

Markets:

Stock futures rose in early morning trading on Wednesday as investors anxiously awaited the Federal Reserve’s aggressive action to tame surging inflation.

The S&P 500 suffered a five-day losing streak on Tuesday, dipping deeper into bear market territory. The equity benchmark has already fallen more than 4% this week already and is now off over 22% from its all-time time hit in early January. The blue-chip Dow slid about 150 points Tuesday, also falling for a fifth straight day Tuesday. The Nasdaq Composite ended Tuesday slightly higher.

The moves come as investors await a decision on rate hikes from the central bank at the conclusion of its two-day meeting on Wednesday. The market is betting on a more than 95% chance of a 75-basis-point rate hike, the biggest increase since 1994, according to the CME Group’s FedWatch tool. (1 basis point equals 0.01%)

Fed Chair Jerome Powell will hold a press conference following the central bank’s policy decision. Investors will be monitoring his language and tone about the Fed’s tightening path forward. The central bank will also release its outlook for its benchmark rate, inflation and GDP.

Treasury yields, which have jumped dramatically this week in anticipation of the big rate hike, pulled back on Wednesday. The two-year rate, most sensitive to changes in monetary policy, surged 40 basis points this week alone to hit its highest level since 2007. The benchmark 10-year yield popped more than 30 basis points to top 3.48%, a high not seen since April 2011.

Portfolio:

We enter the new trading session holding three positions; ALLY, MTW, and holding itrm. Today is really about the Fed. No reason to front run any type of move or chase any price action here. Absolutely none! Stay patient and let's wait. Remember, the first move after the Fed release has been wrong the last several releases. Be patient. Allow it to materialize. Then be ready to trade it! Let's have a great session.