Stocks and index ETFs are sideways on Wednesday, off their recent lows, as investors anxiously await the Federal Reserve meeting for indications of how the next year may progress.
While the markets have been in a steep selloff since the beginning of the month, investors are hoping for a reprieve from the damage. As investors await the meeting major stock index ETFs like the SPDR Dow Jones Industrial Average ETF (DIA) and the SPDR S&P 500 ETF Trust (SPY) are showing modest gains, while the Invesco QQQ Trust (QQQ) has a more significant 1.78% gain as of just after 1:30 p.m. EST.
At the termination of the central bank’s two-day meeting on Wednesday, there is still significant speculation as to how large a potential rate hike might be implemented. Investors and analysts are betting on a more than 95% chance of a 75 basis point rate hike, the biggest increase since 1994, according to the CME Group’s FedWatch tool, but there are some rumors that even a 100 bp rate increase could be possible.
With inflation at its loftiest levels since the 1980’s, at almost 9%, the Fed is likely under pressure from all sides to create a miracle and stave off a recession.
“The change in the headline from 50 basis points to 75 basis points reflects a stark reality but it also reflects the Fed’s determination to underscore its commitment to its mandate to maintain price stability,” said Quincy Krosby, chief equity strategist at LPL Financial. “It’s neither a trial balloon nor a lead balloon — it’s reality.”
While many investors and key analysts see a recession as a near inevitability, there are some who still believe that a strong move from the Federal Reserve now could be the panacea that the stock market needs.
“The stronger the Fed can be with respect to raising rates, the greater the likelihood the market will rally,” he said. “In other words, if the Fed comes in with 50 basis points or 25 basis points, that’s not going to appease the market. The market wants to see definitive action. The market wants certainty, the market wants clarity and the market wants to know that the Fed can regain control of the narrative.”
For more news, information, and strategy, visit VettaFi.