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Marketmind: No time to waver, Chair Powell

EconomyJan 26, 2022 02:40AM ET
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© Reuters. FILE PHOTO: Federal Reserve Chair Jerome Powell pauses while testifying before a Senate Banking Committee hybrid hearing on oversight of the Treasury Department and the Federal Reserve on Capitol Hill in Washington, U.S., November 30, 2021. REUTERS/Elizab

A look at the day ahead from Dhara Ranasinghe.

Some previous market tantrums over a looming tightening in policy made central bankers think twice about taking away hefty monetary support. Yet, for the Federal Reserve, concluding a two-day meeting later on Wednesday, things are now different.

With inflation raging at 40-year highs, the Fed is unlikely to backtrack on its intent to raise interest rates and will almost certainly flag a March rate hike later on Wednesday.

Yet, the almost 9% slide in the S&P 500 this month and the flattening of the U.S. yield curve are not good indicators of sentiment towards the economic outlook, and may temper the case for more hawkish stance from the Fed.

The fine line between taking action to contain inflation but not tightening policy too fast that it brings the recovery to a quick end, is exactly the line Fed chief Jerome Powell has to walk. Markets will be watching his every step.

Meanwhile, odds are split on whether or not the Bank of Canada will hike rates for the first time since 2018 when it meets later in the day. The bank may need to take Omicron's wrath into account while deciding whether to start a tightening campaign geared at taming red-hot inflation.

With central banks in the spotlight, Asian stock markets steadied after three sessions of losses. U.S. and European stock futures were higher.

Geopolitical tensions were likely to remain in focus after U.S. President Joe Biden said he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine, as Western leaders stepped up military preparations and made plans to shield Europe from a potential energy supply shock.

Key developments that should provide more direction to markets on Wednesday:

- Microsoft (NASDAQ:MSFT) offers strong forecast, lifting shares

Fed meeting

- Debt-laden China Evergrande to hold investor call on Wednesday - sources

- Fed policy decision due at 1900 GMT

- Bank of Canada meeting

- US goods trade balance/inventories/new house sales

- US 2 year FRN sale

- UK linker sale

- US earnings: Boeing (NYSE:BA), AT&T (NYSE:T), Nasdaq, Kimberly Clark (NYSE:KMB), Intel (NASDAQ:INTC), Tesla (NASDAQ:TSLA), Whirlpool (NYSE:WHR)

- European earnings: Essity, Sage Group (LON:SGE), Barry Callebaut Main Fed, ECB, BOJ rates

Marketmind: No time to waver, Chair Powell
 

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Comments (6)
Mart Bab
Rubberduck1973 Jan 26, 2022 5:51AM ET
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So wrung. Tell me, why should the FED save a bubbled market? We are stil overvalued and near the all time high. I think everyone is in for a shocker this afternoon
Sean Mastro
Sean Mastro Jan 26, 2022 4:22AM ET
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Arrogance and delusions that society and economic controls can keep people safe and protected economically cant help. The Economic fallout and escape from blame could lead us to a New War to distract away from blame and prosecutions. War is the greatest veil of protectionism of the Elite Classes. We were screwed when they started bringing the coke to “Fix the lues of 2008”. Men who lead in dishonesty bring much pain abd suffering for most.
sandeep varma
sandeep varma Jan 26, 2022 4:21AM ET
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Market turnaround already started since Monday..so dont be long..after fed outcome market will shake few weak bulls but at the end bulls will prevail
AIT OUBELLA Marouane
dogofallstreets Jan 26, 2022 4:08AM ET
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Powell has two options:  - Crash the US Dollar - Crash the US Stokc market
Not Real
Not Real Jan 26, 2022 4:08AM ET
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gotta crash stonks. retailers pull out
Paolo Bertozzi
Paolo Bertozzi Jan 26, 2022 4:08AM ET
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probably he will crash both
hd tv
hd tv Jan 26, 2022 4:08AM ET
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they can't crash the market, although it one big bubble, but with over 40% household wealth in market.A market crash could crash the economy
Chad RicherThanYou
Chad RicherThanYou Jan 26, 2022 4:07AM ET
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The fed’s goal is to own everything, make asset prices higher, and inflate the fiat currency
Djjoshski martin
Djjoshski martin Jan 26, 2022 3:14AM ET
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if s&p500 is up tommrow imma know its short lived rally
Stop Lost
Stop Lost Jan 26, 2022 3:14AM ET
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Such bounces are typical for a bear market rally. But for sure Powell will tone down his message to calm down markets.
Peter ONeill
Peter ONeill Jan 26, 2022 3:14AM ET
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Stop Lost  Powell will tone down his message as he, plus the whole fed board plus most in senate leadership, have made millions on stock purchases and selling over the past 2 years. What is it now - 3 Fed Reserve Board members having to retire early for selling millions in shares just before major fed decisions were announced?
 
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