Stocks were choppy in the lead up to this afternoon’s policy announcement from the Federal Reserve. The major indexes failed to lift off after the central bank held interest rates steady, as expected, but signaled they will stay higher for longer.
Today’s anticipated pause by the Fed left the short-term federal funds rate at a range of 5.25% to 5.5% – the highest it has been in 22 years. However, according to the central bank’s Summary of Economic Projections (SEP), or the “dot plot,” which summarizes what each member expects monetary policy to be going forward, 12 of the 19 members anticipate another quarter-percentage-point rate hike by year’s end.
Additionally, officials are now anticipating just two 0.25% rate cuts next year, down from a previous forecast of four, with the federal funds rate expected to remain above 5% through 2024.
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Any upcoming move from the central bank will be dependent on the “totality” of economic data, said Fed Chair Jerome Powell in his subsequent press conference. However, the committee intends to “hold policy at a restrictive level until we’re confident that inflation is moving down sustainably toward our target,” Powell added, even if this results in “a period of below-trend growth and some softening of labor conditions.”
Many of Wall Street’s top minds were quick to weigh in after the Fed announcement, including Eric Sterner, chief investment officer of Apollon Wealth Management. “I was not surprised that the Fed kept one more rate hike on the table for later this year depending upon how data comes in,” Sterner says. “The more restrictive view into 2024 and 2025 may reignite recession and hard landing fears amongst investors.”
Sterner adds that higher energy prices and the United Auto Workers (UAW) strike are two potential headwinds to the Fed’s path to its 2% inflation target.
Jefferies thinks BHC stock can doubleIn single-stock news, Klaviyo (KYVO) echoed the recent initial public offering (IPO) success of chipmaker Arm Holdings (ARM, -4.1%) and online grocery delivery firm Instacart (CART, -10.7%). The marketing automation firm last night priced its offering at $30 per share – the high end of its range – and opened today at $36.75. Shares hit an intraday high of $37.00, before closing at $32.76.
Elsewhere, Bausch Health (BHC) surged 8.0% after Jefferies analyst Glen Santangelo upgraded the healthcare stock to Buy from Hold and boosted his price target to $16 from $9 – nearly double today’s closing price of $8.34. The analyst believes Bausch Health is in a strong legal position to prevent generics of its irritable bowel syndrome drug Xifaxan until 2028.
As for the major indexes, the Dow Jones Industrial Average slipped 0.2% to 34,440, while the Nasdaq Composite (-1.5% at 13,469) and the S&P 500 (-0.9% at 4,402) suffered more sizable losses.
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