North American News
US stocks close near session lows as traders focus on the Fed rate path
- Major indices fall -1.7% (or more)
The major US stock indices are closing lower and near lows for the day as traders react to the more hawkish Fed rate projections. The Fed now sees a end of year rate of 4.4% which is higher than the markets expectations going into the report. They also see the terminal rate at 4.6% in 2023.
That is a lot of headwinds for companies to work through especially since the USD is strong and companies will likely still have to deal with other constraints including the potential for less demand as the Fed counteracts inflation risk by encouraging unemployment to move higher, and stalling the consumer demand.
The final numbers are showing:
- Dow down -522.45 points or -1.7% at 30183.79
- S&P down -66 points ro -1.71% at 3789.94
- Nasdaq down -204.85 or -1.79% at 11220.20
- Russell 2000 down -25.34 points or -1.42% at 1762.15.
All 11 sectors of the S&P moved lower led by
- consumer discretionary -2.37%
- telecommunication down -2.3%
- materials down -2.2%
The best of the losers today included:
- consumer staples at -0.34%
- industrials -1.34%
- utilities -1.38%
Powell speech: There is no painless way to bring inflation down
FOMC Chairman Jerome Powell comments on the policy outlook after the Federal Reserve’s decision to raise the policy rate by 75 basis points to the range of 3-3.25% following the September policy meeting.
Key quotes
“There is no painless way to bring inflation down.”
“We haven’t given up the idea we can have just a modest increase in the jobless rate while bringing inflation down.”
“Think of price stability as an asset that delivers benefits to the public.”
“Delay in getting inflation down would only lead to more pain.”
“Once you are on path to lower inflation, things will start to feel better.”
FOMC dot plot and central tendencies from September 2022 meeting. End Of Year 2022 4.4%
- The dot plot for 2022 shows end of year at 4.4% vs 3.4% in June 2022
- The dot plot for September 2022 shows the median rate at the end of 2022 at 4.4%, up from 3.4% in June 2022.
- For 2023, the median Fed fund target rate is 4.6% vs. 3.8% in June 2022.
- For 2024, the median Fed funds target rate is now 3.9% vs 3.4% in June 2022
- The initial 2025 median rate is expected at 2.9%
Commodities
US weekly EIA oil inventories +1142K vs +2161K expected
- Weekly EIA supply data
- Prior was +2442K
- Crude +1142K vs +2167K expected
- Gasoline +1569K vs -430K expected
- Distillates +1231K vs +420K expected
- Implied gasoline demand 8.33m vs 8.50m last week
- SPR draw 6.9m vs 8.414m prior
This isn’t far off expectations, which were more bearish after the API data from late yesterday showed:
- Crude +1035K
- Gasoline +3225K
- Distillates +1538K
EU News
European equity close: Cautious optimism ahead of the Fed
- European stocks higher on the day
- Stoxx 600 +0.9%
- German DAX +0.7%
- UK FTSE 100 +0.6%
- Italy MIB +0.6%
- French CAC +0.8%
- Spain IBEX flat
Other News
Bank of America now sees Fed hitting 4.75-5.00% early next year
- New forecasts from Bank of America
Economists at Bank of American now see the Fed getting closer to 5% than 4%.
“We now expect hikes of 75bp in November, 50bp in December, followed by two 25bp rate hikes by March of next year… Our new terminal target range is 4.75-5.00%, up from 4.00-4.25% previously”
Cryptocurrency News
US House Committee proposes a 2-year ban on DAI, USDD and similar stablecoins
- The US House Committee on Financial Services suggested banning algorithmic stablecoins for two years, citing the TerraUSD collapse.
- Issuance or creation of new “endogenously collateralized stablecoins” would also be prohibited should the bill pass.
- The ban on algorithmic stablecoins could impact the few existing coins such as DAI and Frax, pushing this category out of competition from the market.
The Terra ecosystem collapse was the harbinger of one of the worst crashes in the history of crypto. The market has still not been able to recover completely from this drawdown, and the struggle is still evident in the overall market cap’s attempt at rising above $1 trillion.
To prevent another such occurrence, the US The House of Representatives Financial Services Committee (FSC) has come up with a bill that could place stringent regulations on a certain kind of stablecoin.