Fed Rate Decision Shakes Market Up

Overnight, the futures market exhibited a sideways trend in anticipation of a major announcement by the Federal Reserve (Fed) regarding interest rates. Notably, the 50-day Simple Moving Average at 4,027 was a critical support level, providing stability throughout the night. This zone is a pivotal area that would determine the course of the trading session.

The market received early support at the opening bell, preventing any significant drop. However, a sense of indecisiveness prevailed across the market as traders awaited the Fed’s announcement with bated breath. Consequently, the market remained in a narrow range of 20 points, fluctuating between 4,027 and 4,047, as investors hesitated to take any decisive action.

Shortly before the event, the S&P 500 futures began to rise toward the Volume Weighted Average Price (VWAP), which was key psychological level, given the subdued price action. With the market poised for an imminent surge in either direction, the upside move materialized upon the announcement by the Fed’s Chairman, Jerome Powell.

Powell Comments Brings it Back Down

Once Federal Reserve Chairman Jerome Powell began fielding questions, the market began to lose momentum. Powell acknowledged that the long-term goal for inflation remains intact, stating that a 25-basis point increase would not necessarily signal a slowdown in rates, as a 50-basis point increase was still possible. 

While the latest decision was unanimous, it did not necessarily provide insight into the Fed’s next move.

Powell also noted that modeling a recession is difficult, as it tends to be nonlinear. Additionally, the market reacted negatively to Powell’s statement that the Fed is willing to increase rates more than anticipated if necessary. Lastly, Powell affirmed that a rate cut in 2023 is not part of the Fed’s current expectations.

By the end of Powell’s speech, the market had reversed, experiencing a 100-point drop, with significant levels being broken on the way down. As a result, the market is now facing resistance at several key levels, including the 21-day Exponential Moving Average and the psychological level of 4,000.

Economic Events Tomorrow 

Tomorrow, at 8:30 a.m. Eastern, weekly Initial Jobless claim numbers will be released. While this number will be substantial, it will likely be overshadowed by a more extensive agenda created by the market makers on today’s information. 

Market Drops Aggressively Post Powell 

The Nasdaq and the S&P 500 were Negative to close the session. The S&P 500 futures closed down 1.55%, declining 62 points, while the Nasdaq futures closed down 1.31%, losing 167 points. The Dow Jones futures followed, closing down 1.44%, a loss of 471 points.