The U.S. stock market seems poised to press higher this morning, after selling off yesterday afternoon. Overnight, the markets in Europe have been under some pressure. However, closer to home the broader equity market futures have been showing some strength in early-morning trading.
As is well known, yesterday afternoon the Federal Open Market Committee (FOMC) concluded its two-day meeting, weighing in with an interest-rate decision and some prepared remarks. Specifically, the central bank chose to lift rates another 25 basis points (bringing the benchmark rate to the 4.75%-5.0% range). Federal Reserve Chairman Jerome Powell did note that inflation remains stubbornly high and has to be addressed. However, a balanced tone was used in his commentary, and it was implied that the current tightening cycle may be nearing a close. It is worth mentioning that monetary policy actions can take time to take hold, and aggressive moves can have unintended consequences. For instance, some banks are currently facing balance sheet problems and liquidity issues, which could cause a lack of confidence in the financial system, if left unchecked. While the situation appears to be stabilizing, this development can make for tighter credit markets, putting an additional damper on consumers and businesses.
Elsewhere, for investors following the daily economic news, today we get a look at latest weekly jobless claims, as well as the new home sales figures for the month of February.
In corporate arena, a few widely followed corporations delivered quarterly profit reports this morning. Specifically, Darden Restaurants (DRI) put out a constructive report, and that stock is edging up slightly on the pre-market exchanges. We also received an upbeat report from General Mills (GIS), and that issue seems set to move higher this morning.
Technically speaking, the equity market has been quite volatile lately. From here, the next challenge for the bulls will be to push stocks notably beyond the 4,000 mark, clearing the 50-day moving average (located near the 4,015 level). It would also be helpful to see broader sector participation. It is encouraging that the dynamic technology group is finally starting to show some leadership again. However, it is also important that the battered financial sector regains its footing. In general, investors look to the financial sector for the stability it provides, and some improvement here would do much to lift sentiment.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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