Fed Raises Interest Rates, More Hikes Expected

In his Daily Market Notes report to investors, Louis Navellier wrote:

Fed not hawkish, Meta soars, VIX hits the low for the year, stock rally continues.

Fed Raises Interest Rates

Jay Powell was essentially neutral yesterday, saying the Fed would consider further increases step by step, but that inflation trends were encouraging, and very importantly that the Fed no longer models a US recession.

He did say he doesn’t expect to cut in ’23. Today, the ECB also increased a quarter point, to 3.75%, and also said they would be data dependent as to further increases. Stock markets in both the US and Europe are trading with the sentiment that the central banks are largely done, and will only increase if inflation heats up again.

Today, interest rates are up 8bps across the curve as expectations for a Fed rate cut have been pushed back, raising the US dollar and dropping gold. Crude oil, however, is higher, breaking $80/bbl, which may add inflation pressure if it continues to push higher.

Helping sentiment was some very bullish economic data: Jobless claims continue to fall, and durable goods orders were strong. Quarterly data was especially good, with GDP up 2.4% sequentially from 1Q23 2.0% which was forecast to fall, and the GDP Price Index fell significantly to 2.2% from 4.1%, well below the 3.0% forecast. The economy is shrugging off the 5% rate increase from the Fed.

Meta Soars

On the earnings front, Meta (NASDAQ:META) had beats top and bottom and gave strong guidance lifting the stock 7%, now up 155% YTD. Meta spoke of near-term AI gains in ad generation and has reenergized the Megatech group after the pullback from Microsoft’s caution. 219 companies of the S&P have reported so far and 80% have bested estimates with an above-average beat of 5.8%, and 64% have beaten revenue estimates.

Bears Hibernating

Fears of an earnings recession are fading, and the Dow is heading for its 14th up day in a row, the longest run in over a century. FOMO (fear of missing out) is higher than ever and the bears are in hiding, trying to come up with a new reason for the market to pull back.

Coffee Beans: Jailbreaker

A prisoner is on the run in the US after he and three other inmates staged a Shawshank Redemption-style jailbreak – pushing through a drywall ceiling in their cell and using bundled blankets to make it seem as if they were actually in their beds. Source: Sky News. See the full story here.

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