Investors Debate Fed's Rate Cut Projections as Inflation Stays Well Anchored

Barry Adams
22 Mar, 2024
New York City

Stocks on Wall Street looked down after solid gains in the previous two days. 

The S&P 500 index and the Nasdaq Composite edged lower and traded near record levels following the Federal Reserve's monetary policy announcements. 

The market rally was powered by optimism about the Fed's projection of as many as three rate cuts before the end of the year, coupled with the economic growth revision to 2.1% from the previous estimate of 1.4%. 

The Fed's revised projections confirmed that policymakers are confident that the economy is strong enough and that lower levels of interest rates are not likely to fuel inflationary forces. 

However, that optimism could be upended if crude oil prices continue to advance, coupled with supply chain disruptions in the Red Sea. 

Moreover, while goods price inflation has moderated in the last nine months, service price inflation has broadened and anchored deep in the economy, keeping the core rate of inflation sharply higher than the Fed's target rate of 2%. 

 

U.S. Indexes and Yields

The S&P 500 index decreased 0.2% to 5,231.26, and the Nasdaq Composite fell 0.3% to 16,356.38. 

The yield on 2-year Treasury notes increased to 4.61%, 10-year Treasury notes inched down to 4.22%, and 30-year Treasury bonds edged down to 4.39%.

WTI crude oil decreased $0.21 to $81.28 a barrel, and natural gas prices decreased 1 cent to $1.67 a thermal unit.

Gold decreased by $8.63 to $2,172.13 an ounce, and silver fell 9 cents to $24.67. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.20.

 

U.S. Stock Movers

Lululemon Athletica dropped 14% to $413.0 after the athleisure retailer reported strong holiday quarter sales, but its outlook for the current quarter fell short of analysts' expectations. 

FedEx jumped 11.6% to $295.58 after the parcel delivery company reported better-than-expected quarterly results. 

Dutch Bros. plunged 6% to $33.49 after the drive-through coffee chain announced the launch of a secondary offering of its shares. 

TSG Consumer Partners, LP, plans to sell 8 million shares and plans to grant a 30-day option to sell an additional 1.2 million shares to its sole underwriter, Morgan Stanley. 

Nike decreased 6.2% to $94.60 after the company reported mixed quarterly sales in the fiscal third quarter. 

Revenue in the quarter edged slightly higher to $12.43 billion from $12.39 billion, and sales in North America rose 3% to $5.07 billion, while China sales growth slowed to 5% at $2.08 billion. 

Net income in the quarter ending on February 29 was $1.17 billion, up from $1.27 billion, and diluted earnings per share decreased to 77 cents from 79 cents a year ago.