{"id":38936,"date":"2023-07-22T01:10:37","date_gmt":"2023-07-22T05:10:37","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/stocks-could-climb-until-the-fed-ends-the-party-what-to-watch\/"},"modified":"2023-07-22T01:10:38","modified_gmt":"2023-07-22T05:10:38","slug":"stocks-could-climb-until-the-fed-ends-the-party-what-to-watch","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=38936","title":{"rendered":"Stocks Could Climb Until the Fed Ends the Party. What to Watch."},"content":{"rendered":"
\n
<\/p>\n
<\/p>\n<\/figure><\/div>\n

The best noise-canceling headphones may be the ones the market has been wearing this year. It better hope the Federal Reserve doesn\u2019t snatch them away\u2014because stocks might not like what they\u2019re forced to listen to. <\/p>\n

For now, investors can\u2019t hear\u2014or see\u2014much evil. The
\n S&P 500 index
\n advanced 0.7% this past week, and the
\n Dow Jones Industrial Average
\n rose 2.1%, extending its winning streak to 10 days. Only the
\n Nasdaq Composite,<\/span>
\n down 0.6%, lost ground. <\/p>\n

\n

With the latest gains, the S&P 500 has risen 18.2% in 2023, against a backdrop of recession worries, mixed economic data, a banking crisis, and political instability. Earnings season, which continues, seems to be going just fine for companies not named
\n Tesla
\n (ticker: TSLA) or
\n Netflix
\n (NFLX). At this point, the Fed might be the only thing able to stop the momentum.<\/p>\n

Not that Wall Street is worried. It is almost a foregone conclusion that the central bank will raise interest rates by a quarter of a percentage point at its policy meeting on July 25-26, after pausing rate hikes last month. Expectations for a hike in September stand at just 16%, according to the CME FedWatch Tool. If the Fed confirms the accuracy of that point of view, then the market could continue its run higher. <\/p>\n

The Fed, though, might not see it that way. Yes, inflation stands at 3%, down from a high of 9.1% last year, which is a good sign. But core inflation is running at 4.8%, well above the Fed\u2019s 2% target, and the labor market has yet to show durable signs of a cooling economy. For all the headlines of large layoffs at big companies earlier this year, jobless claims fell to 228,000 in the week ended Thursday from 237,000 the prior week. If the Fed signals that it still has more work to do, it could tip markets lower. <\/p>\n

\u201cPeople are getting comfortable, confident, and complacent,\u201d says Michael Darda, chief market strategist at Roth MKM. \u201cIt\u2019s a mistake to assume we\u2019re really out of the woods.\u201d<\/p>\n

And even if the market makes it out of July unscathed, there\u2019s always August, and the Fed\u2019s annual Jackson Hole Economic Symposium late in the month. Last year, Fed Chair Jerome Powell\u2019s remarks at Jackson Hole spooked markets as he warned that financial tightening would bring \u201csome pain\u201d to households and businesses. That pain was felt in the market: The S&P 500 fell 19.4% in 2022.<\/p>\n

Few economists and market watchers expect Powell to be quite as hawkish now that inflation has come down from last year\u2019s highs, but his coming comments still could cast a chill. \u201cAlthough some consolidation in markets makes sense given the increasing odds financial conditions have eased too much, we wouldn\u2019t aggressively press that trade now,\u201d writes Dennis DeBusschere, chief market strategist at 22V Research. \u201cThe Fed has a chance at a soft landing, and they are likely to go for it.\u201d<\/p>\n

That\u2019s one reason Nicholas Colas, co-founder of DataTrek Research, remains optimistic, despite signs that Big Tech, the driver of this year\u2019s rally, may be losing momentum. With the S&P 500 up so much this year, some investors may opt to take profits and sit out the rest of 2023. Others might just rotate out of highflying tech names into cyclicals, such as financials. That might make for a good trade, and a rotation is typically a bullish signal. <\/p>\n

But because tech is such an outsized portion of the market, those other stocks would have to post enormous gains to move the index meaningfully in the back half of the year. \u201cIf Big Tech goes down by 10%, you need everything else to go up so much more,\u201d Colas said.<\/p>\n

The economy might have something to say about the market\u2019s rally. Stocks appear to have dismissed the potential for a recession, despite the procession of hot and cold economic data. It\u2019s enough to make Tesla CEO Elon Musk complain that \u201cone day, it seems like the world\u2019s falling apart and the next day everything is fine,\u201d before acknowledging that he doesn\u2019t \u201cknow what the hell is going on.\u201d <\/p>\n

The data suggest that the possibility of a recession shouldn\u2019t be ignored. The leading indicators index, for one, has fallen for 15 consecutive months, something that has always resulted in a slowdown. That jibes with the yield curve, which has been inverted for almost a year\u2014a recession prognosticator without fail. \u201cWe have a really persistent signal in the yield curve,\u201d says Roth MKM\u2019s Darda. \u201cIt would be unprecedented not to have a recession.\u201d<\/p>\n

And that would surely stop the music\u2014unless the Fed does it first. <\/p>\n

Write to <\/strong>Carleton English at carleton.english@dowjones.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The best noise-canceling headphones may be the ones the market has been wearing this year. It better hope the Federal Reserve doesn\u2019t snatch them away\u2014because stocks might not like what they\u2019re forced to listen to. For now, investors can\u2019t hear\u2014or see\u2014much evil. The S&P 500 index advanced 0.7% this past week, and the Dow Jones […]<\/p>\n","protected":false},"author":1,"featured_media":38937,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-38936","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nStocks Could Climb Until the Fed Ends the Party. What to Watch. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The best noise-canceling headphones may be the ones the market has been wearing this year. 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