Stocks closed lower yesterday after the Fed raised interest rates for the first time in 3 years.

The S&P 500 and Nasdaq were in the green all day long until the announcement came out, and fell even more during the Fed Chair Press conference. It hit its lowest intraday levels shortly after it concluded, then managed to bounce nicely into the close. But still closed lower on the day.

Before I get into it, let me say, going back to 1994 (modern rate-hike era), when the S&P 500 falls on an FOMC Announcement day, it has historically risen the next day roughly 55-60% of the time. The average move is 0.20% to 0.35%.

Granted, that's just one day. But I'm pointing that out because I think there's a good chance it could soon lead to a new leg higher for the market.

For one, it was widely expected. Much of the recent selling was likely done in anticipation of the hike. Two, I believe it could be viewed positively because it underscores the Fed's independence and proves their commitment to fighting inflation. And three, yields have been climbing higher on their own without the Fed. And the hike better aligns with the market.

Anyways, the Fed vote was unanimous to raise rates by a quarter point, putting the Fed Funds Rate at a range of 3.75%-4.00% (midpoint 3.88%).

While Fed Chair Kevin Warsh did not provide any guidance for the outlook on future monetary policy, the Summary of Economic Projections (SEP) showed that 16 of 18 participants expected another rate increase this year (with four of them expecting two more).

The SEP, however, only gets as high as 4.1% in 2026 and same for 2027, and begins falling, with the longer run rate at 3.2%.

The SEP also showed the Fed raising their GDP outlook for 2026 to 2.3% (up from June's projection of 2.2%), with 2027 at 2.4%, up from June's 2.3% estimate. (Mr. Warsh noted that "the economy's output is solid," and that "capital expenditures and productivity are strong.")

The unemployment rate is pegged at 4.1% for this year and next (where it is now). That's down from June's forecast of 4.3% for both years. (Mr. Warsh also said that "current unemployment rates are consistent with full employment," and that "labor markets are solid and steady.")

SEP also shows PCE inflation (headline) at 3.7% this year, but falling to 2.3% in 2027. (That's vs. previous expectations for 3.6% and 2.3%, which is not much of a change.) Core PCE is forecast at 3.4% this year and 2.5% next year vs. 3.3% previously and 2.5%. (Again, not much of a change. And it suggests rates could very well start falling sooner rather than later.)

All in all, yesterday's Announcement didn't pack any real surprises. Actually, I thought it was less hawkish than what some had been fearing. Yes, it was unanimous to hike. But that's not bothersome. And the SEP was reassuring. And suggests this is temporary. Especially given that Warsh attributes a portion of the rise in inflation to higher oil prices rather than a broad-based acceleration. (And the Middle East tensions won't last forever.)

The next FOMC Announcement comes out on October 28.

Today we'll get the Housing Starts and Permits Report, the Pending Home Sales Index, Weekly Jobless Claims, and the Philadelphia Fed Manufacturing Index.

And we'll see if the market can reverse yesterday's decline like it usually does.

See you tomorrow,