- The stock market added to losses right after the Federal Reserve's statement hit the tape, with the FOMC members now predicting a rate hike in 2023.
- The major averages had been near lows of the day right before the release and quickly sank further.
- The S&P (SP500) -0.9%, Nasdaq (COMP.IND) -1% and Dow (DJI) -0.9% are all lower.
- Bonds also sold off on the shift in the Fed dot plot, with 13 of 18 FOMC members now predicting at least one rate hike will take place in 2023.
- Seven members now see a hike in 2022 vs. four in March. And the median fed funds rate forecast for 2023 is 0.6% vs. the March projection of 0.1%.
- The 10-year Treasury yield is up 4 basis points to 1.54%. (NYSEARCA:TBT) (NASDAQ:TLT)
- The 2-year is at 0.19%, the highest it's been since June 2020. (NASDAQ:SHY)
- The 5-year is seeing the most action, up 10 basis points to 0.88%. (NASDAQ:IEI)
- The Fed kept its statement pretty much unchanged, still noting that inflation is largely due to "transitory" factors.
- "We're still below 1.55 areas, which is where we broke down in yields and the downtrend that we've had since March ... is still solidly in place," Scott Minerd, Guggenheim CEI, says.
- "People have been fighting this rally for month and it's the pain trade," Minerd said on Bloomberg, adding that the market may welcome the Fed reacting to a hot economy.
- "I don't see any reason for hawkish news to be anything but positive for the bond market."
- But Eurodollar futures are now pricing in a full fed funds rate hike by the end of 2022.
- Financials (NYSEARCA:XLF) are the only sectors higher in the S&P and that's just barely.
- Communications Services (NYSEARCA:XLC) is brining up the rear, with Consumer Staples (NYSEARCA:XLP) also down sharply.
- The megacaps are all lower, with Facebook struggling the most.
- Measure for June employment numbers out this morning pointed to increased hiring, which may have given the Fed a more hawkish tilt.