What’s in Today’s Report:
- Updated FOMC Preview – The Fed Will Hike 75 bp Today (And That May Not Be Bad for Markets)
- A Look at the TIPS Market Reveals Increased Confidence in the Fed
Futures are modestly higher as bond yields and the dollar pulls back ahead of the Fed and an emergency ECB meeting that will address fragmentation and the bank’s bond-buying programs sparking risk-on money flows this morning.
Economically, Chinese Fixed Asset Investment, Industrial Output, and Retail Sales were all better than feared overnight which is easing concerns about the health of global growth trends.
Looking into today’s session, there is a slew of economic data due out in the U.S. including: Retail Sales (E: 0.1%), Empire State Manufacturing Index (E: 5.5), Import & Export Prices (E: 1.2%, 1.3%), and the Housing Market Index (68). At this point, the Fed is expected to hike aggressively in the months ahead to tame inflation regardless of the state of economic growth, so the stronger the data, the better for risk assets.
After the flurry of data in the morning, the market focus will shift to the Fed with the FOMC Announcement at 2:00 p.m. ET and the Fed Chair Press Conference 2:30 p.m. ET. As discussed in more detail in today’s report, a 75 basis point hike may not cause further losses in equities as long as investors gain confidence in the Fed’s ability to get inflation under control. That will be the key to how stocks and other markets react to today’s decision.