Dow dropped 530 to session lows, decliners over advancers about 2-1 & NAZ declined 190. The MLP index was off 3+ to the 213s & the REIT index dropped 13 to 348 because they feel the effects of high interest rates. Junk bond funds were mixed & Treasuries saw heavy buying, reducing yields. Oil rose 1+ to the 71s & gold jumped 37 to 1978 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The Federal Reserve enacted a qtr percentage point interest rate increase, expressing caution about the recent banking crisis & indicating that hikes are nearing an end. Along with its 9th hike since last Mar, the rate-setting Federal Open Market Committee noted that future increases are not assured & will depend largely on incoming data. “The Committee will closely monitor incoming information and assess the implications for monetary policy,” the post-meeting statement said. “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.“ That wording is a departure from previous statements which indicated “ongoing increases” would be appropriate to bring down inflation. The softening tone came amid a banking crisis that has raised concerns about the system’s stability. The statement noted the likely impact from recent events. “The U.S. banking system is sound and resilient,” the committee said. “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.“ Despite the warnings about potential implications from the banking crisis, the committee unanimously approved the rate hike. The increase takes the benchmark federal funds rate to 4.75-5.00%. The rate sets what banks charge each other for overnight lending but feeds through to a multitude of consumer debt like mortgages, auto loans & credit cards. Projections released along with the rate decision point to a peak rate of 5.1%, unchanged from the last estimate in Dec & indicative that a majority of officials expect only one more rate hike ahead. Data released along with the statement shows that 7 of the 18 Fed officials who submitted estimates for the “dot plot” see rates going higher than the 5.1% “terminal rate.“ The next & years' worth of projections also showed considerable disagreement among members, reflected in a wide dispersion among the “dots.” Still, the median of the estimates points to a 0.8 percentage point reduction in rates in 2024 & 1.2 percentage points worth of cuts in 2025.
Fed hikes rates by a quarter percentage point, indicates increases are near an end
Ford (F) is about to tell investors what they’ve long wondered: How much is the transition to electric vehicles costing? The
automaker plans to begin reporting its financial results by
business unit, instead of by region, ushering in the new reporting
structure with a “teach-in” for analysts & media — on the theme of
“Ford Refounded” — & releasing revised versions of its financial
results that will reveal how the new business units would have performed
in 2021 & 2022. Those new business units include “Ford Blue,” Ford’s traditional
internal combustion engine business; its “Model e” electric vehicle
unit; the “Ford Pro” commercial & gov fleet business; “Ford
Next,” which includes nonautomotive mobility solutions & other future
tech; & its existing Ford Credit financial services subsidiary. The changes amount to the most detailed look yet by any legacy automaker into the finances behind the EV business. The
carmaker is expected to release profits & losses, revenue, margins & earnings before interest & taxes, or EBIT, for each of the units –
giving investors & analysts a baseline for comparisons as the
company's transformation unfolds. As part of a sweeping rethink of its business under CEO Jim Farley, Ford decided last year to separate its primary profit engines, internal combustion vehicles & its commercial fleet business, from
the company’s emerging all-electric vehicles, which are not expected to
be profitable for at least a few years. Farley and other
execs have emphasized that the reporting changes aren't just about
disclosure: The new format reflects the way Ford's exec team thinks
about & runs the business. “The
changes are significant. It’s not the first time Ford Motor Co. has had
to reimagine its future or form its own path that’s different from
other companies,” Farley said when announcing the new business units on Mar 2, 2022. “Is this about winning? 100%.” The stock fell 24¢.
If you would like to learn more about Ford, click on this link:
club.ino.com/trend/analysis/stock/F_aid=CD3289&a_bid=6ae5b6f7
Ford is about to break out big EV losses for the first time
Chinese Pres Xi Jinping left Moscow after a 3-day visit to the Russian capital that seemed to produced mixed results for the tentative allies. China's leader & his Russian counterpart Vladimir Putin reaffirmed areas of strategic cooperation & plans to extend economic ties & increase trade up to 2030. They also both criticized the US for undermining global strategic stability. But there was little in terms of substance from the meeting & official statements from both sides, made after talks concluded yesterday, disclosed few details about the implementation of economic agreements. Fred Kempe, the chief exec of the Atlantic Council, said that China was exploiting Russia's desperation for an alliance, saying the summit could be summed up as being “Putin’s desperation meeting Xi’s opportunism.” In other news, both Ukrainian & Russian officials said separately that Kyiv & Zaporizhzhia, & Sevastopol in Russian-occupied Crimea, had been targeted by drone & missile attacks today. Japan's prime minister pledged to provide Poland with development support to help the European country assist neighboring Ukraine as it defends itself from Russia's invasion. Polish Polish Prime Minister Mateusz Morawiecki hosted Japanese Prime Minister Fumio Kishida in Warsaw a day after Kishida made a surprise visit to Kyiv & met with Ukrainian Pres Volodymyr Zelenskyy. “Bearing in mind the increasing burden on Poland due to the prolonged invasion of Ukraine,” Kishida said Japan would offer Poland assistance to support its role & is looking to “vigorously build up” projects.
Gold prices ticked higher after suffering the biggest pullback for a most-active futures contract in 6 weeks during the prior session. Gold futures for Apr increased $2 to settle at $1943 per ounce. Gold prices are likely to move once the Fed announces its decision on interest rates, along with releasing its latest batch of economic projections. Chair Jerome Powell will also deliver a statement before answering questions from the press.
Gold Prices Inch Higher Ahead of Fed Decision
Oil prices settled with a gain, shortly after the Federal Reserve announced its decision to boost its benchmark fed funds rate by a qtr of one percentage point. Oil prices & equities rallied in the minutes following the Fed announcement, as the central bank's language around future rate hikes softened, which supports the outlook for risk assets. May West Texas Intermediate crude rose $1.23 (1.8%) to settle at $70.90 a barrel.
Oil futures end higher as Fed ‘softens’ language around future rate hikes rates
On balance, investors remain nervous following the Fed meeting. The rate hike was well advertised. But previously Powell said the fight against inflation would mean pain. He was right & investors are feeling that now. The Dow remains not far from its 5 month low (see below) & safe haven gold is near recent highs!Dow Jones Industrials
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