Dollar and treasury yields rebounded overnight after Fed Chair Jerome Powell talked down the chance of a rate cut after Fed kept interest rate unchanged at 2.25-2.50% as widely expected. In particular, 10-year yield hit as low as 2.455 earlier in the day but closed up 0.002 at 2.511, regained 2.5 handle. DOW closed down -0.61%, S&P 500 lost -0.75% and NASDAQ dropped -0.57%.
In the post meeting press conference, Powell noted that “our policy stance is appropriate at the moment” and emphasized “we don’t see a strong case for moving it in either direction. Fed acknowledged that both headline and core inflation were running below targets. But Powell said that’s mostly due to transient factors. He predicted inflation to pick rise back to 2% target ahead.
Here are some suggested readings on FOMC:
- Fed Judges Weak Inflation as Transitory, Dismissing Rate Cut Chance
- Northern Exposure: FOMC Hold to Sanguine View of Outlook
- Fed Holds Rate Target and Guidance Steady, Onboarding Mixed Economic Data
- Fed Leaves Rates Unchanged in May, Notes Deceleration in Inflation
- FOMC Recap: Technical Tweaks Do Little To Dissuade Doves
- Fed chair Jerome Powell press conference live stream
- Fed stands pat, acknowledges below target inflation, but maintains patient stance
10-year yield recovered strongly after breaching 2.463 key near term support. But still, risk will stay on the downside as long as 2.614 resistance holds. Rebound from 2.356 is likely completed after hitting 55 day EMA. Sustained break of 2.463 should resume larger down trend from 3.248.
S&P 500 edged to historical intraday high at 2954.13 but reversed to close down -0.75% at 2923.73. SPX continued to lose upside momentum as seen in daily MACD. We maintain the view that it’s not resuming long term up trend despite breaching 2940.91 key resistance. Thus, near term reversal should be around the corner and break of 2891.90 support should at least confirm short term topping. Nevertheless, for sure, sustain trading above 2940.91 will prove our view wrong.
