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TRADING THE WEEK: Market Meanders Post-FOMC
Traders Magazine Online News, March 20, 2017
Now that the Federal Reserve has raised short-term interest rates and the market has digested its statement, traders are relaxing and letting stocks trade a bit directionless.
Looking back last week, after its two-day policy meeting, the Federal Open Market Committee voted to raise the range of the federal funds rate to 0.75% and 1.00%, citing progress in labor market growth, business fixed investment and inflation. The move was widely expected.
Neel Kashkari
“In view of realized and expected labor market conditions and inflation, the Committee decided to raise…the fed funds rate,” the central bank wrote in its statement.
One member of the committee, Minneapolis Fed President Neel Kashkari, voted against the decision, preferring to keep the federal funds rate between 0.50% to 0.75%. Kashkari is a new voting member of the FOMC this year.
Lone wolf Kashkari voted against last week’s policy move and has been public voicing his concerns that the U.S. economy is still underperforming when it comes to job creation and there are few to no signs of inflation.
Even after the data support tightening, Kashkari said in a statement, the Fed should wait on raising interest rates until it publishes a detailed plan for how and when it will reduce its $4.5 trillion balance sheet.
The debate now looks to be how many more times the Fed will hike rates – with some traders betting on one more time while others say two more hikes will come. The consensus is for two more rate hikes – totaling no more than 50 basis points. But with the FOMC done - for now – the market is back to eyeing and pondering valuations and Presidential policies.
“We’re looking at a market now that has gotten what it wanted -- a rate hike -- and now is taking a pause to adjust and reflect on itself,” said a floor trader. “The market isn’t going to make any dramatic moves to upside or downside. Everyone is talking about valuations being high – so there’s limited upside. But there doesn’t seem to be any conviction that they are too high, as no one is really selling.”
Trading on U.S. equity exchanges reflected the general market malaise as volume was reported at an average 6.78 billion shares for the week ended March 17, just up slightly from the 6.76 billion shares per day for the week ended March 10, according to Bats Global Markets data. Prior to the US jobs report, volume spiked and averaged 7 billion shares per day or better.
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