Stocks Move Lower After Fed Raises Rates Half a Point

What you need to know…

The S&P 500 Index ($SPX) (SPY) is lower by -0.47%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) is sliding -0.66%.

The Federal Reserve increased the fed funds rate by 0.5% to a range between 4.25% and 4.5%. This is the highest level in 15 years. Fed officials said that rates will remain elevated through 2023 and expect a terminal rate of 5.1%.
T-note yields rose, with the 10-year T-note yield up +0.035 bp at 3.543%.  

Delta Air Lines forecasted 2023 adjusted EPS above the consensus.  Also, Microsoft has entered into a pact with Viasat to increase internet availability to underserved communities globally.  In addition, Barclays upgraded Lennar and PulteGroup.

Charter Communications is down -15% after it said it would spend $5.5 billion on its network to bring higher-speed broadband connections to customers.  Also, Best Buy is down more than -2% after Bank of America downgraded the stock to underperform.  In addition, Tesla is down more than -1% after Goldman Sachs cut its price target on the stock. 

Today’s stock movers…

Ansys Inc (ANSS) is up more than +2% today to lead gainers in the S&P 500 after Baird upgraded the stock to outperform from neutral. 

Delta Air Lines (DAL) is up more than +2% after forecasting 2023 adjusted EPS of $3.07-$3.12, stronger than the consensus of $2.89. 

Paccar (PCAR) is up nearly +2% after Morgan Stanley upgraded the stock to overweight from equal weight. 

Microsoft (MSFT) is up more than +1% to lead gainers in the Dow Jones Industrials after it entered into a pact with Viasat to increase internet availability to underserved communities globally.

Datadog (DDOG) is up more than +3% to lead gainers in the Nasdaq 100 after Oppenheimer & Co upgraded the stock to outperform from market perform. 

Lennar (LEN) and PulteGroup (PHM) are up more than +1% after Barclays upgraded both stocks to overweight from equal weight. 

Charter Communications (CHTR) is down more than -13% to lead losers in the S&P 500 and Nasdaq 100 after saying it will spend $5.5 billion on its network to bring higher-speed broadband connections to customers.

Best Buy (BBY) is down more than -2% after Bank of America downgraded the stock to underperform from neutral. 

Caesars Entertainment (CZR) is down more than -2% after Bank of America downgraded the stock to neutral from buy.

Digital Realty Trust (DLR) is down more than -2% after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Penn Entertainment (PENN) is down more than -2% after Bank of America downgraded the stock to neutral from overweight.   

Tesla (TSLA) is down more than -1% after Goldman Sachs cut its price target on the stock to $235 from $305 to reflect “softer” supply and demand.

Marriott International (MAR) is down more than -1% after Citigroup downgraded the stock to neutral from buy.

Across the markets…

March 10-year T-notes (ZNH23) today are up +5 ticks, and the 10-year T-note yield is down -1.5 bp at 3.4873%.  March T-notes this morning are modestly higher on speculation that Tuesday’s slower-than-expected increase in U.S. Nov CPI will encourage the Fed to slow its pace of interest rate hikes. However, gains in T-notes are limited by negative carryover from a rise in European government bond yields.  The 10-year UK gilt yield rose to a 4-week high today of 3.327%, and the 10-year German bund yield rose to a 2-week high of 1.997%.

The dollar index (DXY00) this morning is down by -0.17%.  The dollar this morning is slightly lower, although it remains above Tuesday’s 6-month low.  The dollar is under pressure from expectations for the Fed today to slow its pace of rate hikes to +50 bp from +75 bp in the last four FOMC meetings.  The dollar is being undercut by speculation the Fed may take on a less hawkish tone following today’s FOMC meeting. 

EUR/USD (^EURUSD) today is up by +0.08%.  The euro today is modestly higher and is just below Tuesday’s 6-month high.  A weaker dollar today is supportive of the euro.  The euro is seeing support from expectations that the ECB at its meeting on Thursday will raise rates by +50 bp.  Gains in EUR/USD are limited by today’s weak Eurozone industrial production report.

Eurozone Oct industrial production fell -2.0% m/m, weaker than expectations of -1.5% m/m.

USD/JPY (^USDJPY) this morning is down by -0.54%.  The yen today added to Tuesday’s gains and climbed to a fresh 1-week high against the dollar.   The yen found support today after a Bloomberg report said that BOJ officials see the possibility of having a policy review next year.  The yen also gained on better-than-expected news on Japan Oct core machine orders and Q4 Tankan large manufacturing business conditions.

Today’s Japanese economic news was mostly supportive of the yen.  Oct core machine orders rose +5.4% m/m, stronger than expectations of +1.8% m/m and the largest increase in 6 months.  Also, the Q4 Tankan large manufacturing business conditions fell to 7 from 8 in Q3, stronger than expectations of 6.  On the negative side, Oct industrial production was revised downward by -0.6 points to -3.2% m/m from the initially reported -2.6% m/m, the biggest decline in 5 months.

February gold (GCG3) this morning is down -2.2 (-0.12%), and March silver (SIH23) is up +0.120 (+0.50%).  Precious metals prices this morning are mixed sharply higher, with gold jumping to a 4-month high and silver soaring to a 7-3/4 month high.  Higher global government bond yields today are weighing on gold prices.  However, losses in gold are limited, and silver rose, on speculation the Fed will signal at today’s FOMC meeting that it will slow its rate-hike regime.

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