Equity futures point to a lower open this morning as the market feels the sobering bucket of water thrown at it late Friday from Atlanta Fed President Raphael Bostic. Shortly after the stock market closed out its latest winning week, Bostic shared he now projects just one interest-rate cut this year, adding that reduction will likely happen later in the year than he previously expected.
Should we be surprised following the March Flash US PMI report out last Thursday that found “Respective rates of output price inflation accelerated sharply across both manufacturing and services, quickening to 13- and eight-month highs as companies passed through higher input costs to their customers.”
No, no we should not.
We should also remember Bostic was already calling for just two rate cuts, not the current potential three reiterated by the Fed’s latest set of economic projections published last Wednesday. Today we have not only additional comments from Bostic before the market opens, but also Chicago Fed Austin Gooslbee (9:05 AM ET), and Fed Governor Lisa Cook(10:30 AM ET). No doubt the market will be looking to see if Goolsbee and Cook match Bostic’s tone, but it’s hard to see how they won’t simply because the March Flash PMI data follow Fed Chair Powell’s comment the January and February inflation data did little to bolster the Fed’s confidence inflation was progressing toward its 2% target.
This means the shortened week could very well bring the sobering remarks we were expecting last week about rate cuts and their timing.
In last week’s TheStreet Pro Podcast, noted technical analyst Helene Meisler shared the stock market was overbought and sentiment was running high. Meisler also shared that the S&P 500 has been in a channel between 5,100-5,300 and with a quiet, shortened trading week as well as those simultaneous conditions, we could see the market give back some of its recent gains.
Because US equity markets are closed for Good Friday, it means one of the higher profile economic data points, the next reading for the closely watched PCE Price Index will be published when the market is closed. That same data Fed Chair Powell will also be speaking, and this should tell us that as the market gets ready for the March quarter earning season, the outcome of those events will set the tone for the start of 2Q 2024.
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