Pre-markets up ahead of Fed announcement – July 27, 2022
Wednesday, July 27, 2022
After appearing to hedge against any potential “bad news” from the Fed this afternoon, when its final monetary policy meeting ends and the final interest rate hike is announced, pre-market futures are moving higher well in positive territory this morning: the Dow is +162 points at this time, the S&P 500 is at +36 and the Nasdaq is far ahead: +188 points.
There are so many moving parts around this Fed meeting, compared to the last two – where we saw increases of 50 basis points (bps) and 75 bps, respectively: the latter the highest move in the Fed in 28 years – how difficult it is to predict a reaction. What we can assume, despite hesitant headlines to the contrary, is that 75 bps is a lock.
Consider the Fed’s somewhat startling move from 50 basis points to 75 basis points at its last meeting: after clearly telegraphing a half-point hike for a month, and during the quiet period before each the Fed, it was leaked to the press (somehow) that 75 bps was announced. So the increase we saw in June didn’t really surprise those who were paying attention.
No such article came out before the July meeting. This Jay Powell-led Fed, while imperfect, worked to make sure its intentions were clear in advance – the better not to disrupt markets. So, alongside rising interest rates that would take the fed funds to 2.25-2.50%, the expiration of treasury bills and mortgage-backed securities will (rather slowly) shrink the balance sheet of the Fed. It is generally expected that all these movements will continue to dampen inflation.
Fed suspends new monetary policy meetings until after Labor Day this year; he will have more than a month of economic data to assess whether these moves are having the desired effect on measures of inflation across the economy. From what we have seen so far, there are already significant changes in the housing market, among others. The trick for the Fed will then be to pump the brakes without letting inflation spiral out of control again.
Durable Goods Orders for June is well above expectations: +1.9% – more than double the +0.8% of the previous month and well beyond the -0.4% sought by the consensus of analysts. It was the fourth straight month for durable goods orders and its highest month-over-month jump since January. Wholesale inventory came in at +0.4% above estimates, which should now impact tomorrow’s second quarter GDP print.
The Boeing Company (BA – Free report) missed on both top and bottom results in its Q2 report this morning, with a loss of -37 cents per share well above the Zacks consensus -8 cents, and revenue of $16.68 billion – 5.87% lower than the $17.72 billion estimate. Still, the aerospace giant appears to have righted its ship when it comes to new orders — not just with the 737 MAX back online, but also with upcoming deliveries for the 787. Shares are up more than + 3% in pre-marketing. To learn more about BA income, click here.
A big beat was delivered by Medicare Human (HUM – Free report) this morning, the company beat expectations by +13% on net income, reporting $8.67 per share. Revenue of $23.66 billion in the quarter also beat estimates, by +1.16%. Humana shares are up +6% year-to-date, but yield a point or more on news from pre-market activity. To learn more about HUM’s earnings, click here.
After today’s close, we also have a big second quarter reporting session, with Meta platforms (META – Free report) Qualcom (COMQ – Free report) , Etsy (ETSY – Free report) and Ford (F – Free report) reporting on results, among many others. This, of course, will follow the big Fed announcement and ensuing press conference with Jay Powell; look for it around 2 p.m. ET.
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