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Fed's Crucial FOMC Meeting in Focus

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We currently exist in one of those weeks that will wind up being a big deal, one way or the other. Between a massive haul of quarterly earnings reports, big monthly jobs numbers to be released, and of course a hugely consequential Fed meeting today and tomorrow that will determine monetary policy going forward, it could all line up to something of a perfect storm for the markets.

Consensus is now that the Fed will hike interest rates half a percentage point, which will bring the bank-to-bank rate to between 0.75-1.00%. Actual retail bank customers looking for loans are already paying much more than this, including an average 5.4% 30-year fixed mortgage rate. So will this actual raise (to still historically low interest rate levels) push these loan rates even higher in the near-term?

That’s what the Fed wants to see, as it will then add to the price tag of a home, car, etc. with the idea that it will eventually suppress prices, thereby curbing inflation. Tomorrow’s statement and presser will also likely deal with a method for draining some $9 trillion in assets from the Fed’s balance sheet — a result of many months worth of backstopping the economy from the start of the pandemic reaching American shores. Just how this gets drawn down ought to have some impact on market participants.

After the opening bell this morning, we see a new JOLTS report for March which documents existing jobs in the domestic labor market, as well as job “quits.” (These came in at 11.3 million and 4.4 million, respectively, the previous month.) Also Factory Orders and Motor Vehicle Sales — for March, as well — will give us the status of goods productivity and high-end consumer purchases, which will provide more grist for the Fed’s mill this week.

Pfizer (PFE - Free Report) shares are flat after the Big Pharma staple missed Zacks consensus estimates on both top and bottom lines in its Q1 report this morning, with earnings of $1.62 per share light of expectations by 4 cents, and revenues of $25.66 billion beneath the $26.49 billion analysts were looking for. Covid sales guidance for full-year 2022 were higher than expected: $32 billion for the vaccine, $22 billion for its preventative antiviral. Yet full-year earnings estimates were lower than previous expectations.

BP (BP - Free Report) put up a mixed Q1 report this morning, after taking a whopping $20.4 billion loss from the company pulling out its 20% ownership of Russia’s Rosneft oil company, which it did three days after President Putin ordered the invasion of Ukraine. Earnings of $1.92 per ADS beat the Zacks consensus by more than 50 cents, while revenues of $51.22 billion came up short of the $53.13 billion we were looking for. The company also offers a dividend of $5.46 per share. Shares are up nearly +5% on the news.

Estee Lauder (EL - Free Report) shares are falling almost -10% on its fiscal Q3 release ahead of today’s opening bell. Earnings of $1.90 per share marks a big beat over the $1.66 expected, while sales of $4.25 billion in the quarter missed estimates by -1.8%. Again, however, its full-year guidance posted something of a disappointment for early-morning traders, even with the company announcing a 60 cent per share buyback program.

After the closing bell this afternoon, the quarterly earnings parade continues, with big names including Advanced Micro Devices (AMD - Free Report) , Starbucks (SBUX - Free Report) and Skyworks (SWKS - Free Report) , among many others. These will further inform the narratives for chipmakers and consumer discretionary habits in the first three months of the year. Ahead of today’s opening bell, we’re in the green again, but only dipping a toe in the water just yet. We’d already recovered from an early-morning selloff, so keep one eye on the VIX today, as well.