Equities Surprise As Fed Hikes
Markets survived the Fed meeting last week, as most sectors were higher after the 25 basis point rate hike.
The Fed raised rates as expected, however, the market was more interested in the language used by the Central Bank and their Chairman on Wednesday. Oddly, the Fed came out largely hawkish and the market shrugged off the news. The Fed continues to speak out of both sides of their proverbial mouth. While the Central Bank left open the possibility of more rate hikes, Chairman Powell stated in his press conference that further declines in inflation would also factor into their thinking. Inflation has declined for 6 consecutive months. We’ll find out next week if it will be 7 consecutive months of declines. On top of that, inflation is no longer the main concern of Americans, according to a new Gallup poll.
To-date, 50% of S&P 500 companies have reported 4th quarter earnings and 70% have exceeded analysts’ estimates. That trails the 5-year average of 77%.
In terms of revenues, 61% have come in above estimates, which is below the 5-year average of 69%. Meanwhile, the labor market was robust in January as the economy added 517,000 jobs, far and above the 185,000 expected. Both Initial Claims and Continuing Claims beat analysts' expectations last week. Initial Claims are near 9-month lows. This leaves room for additional rate hikes by the Fed and we will hear more from multiple Fed speakers this week about how long they may keep rates “higher for longer.”
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