Stocks Retreat Ahead Of Fed Interest Rate Decision

S&P 500 futures are losing ground in premarket trading while traders wait for the Fed Interest Rate Decision and the subsequent commentary.

The Fed has previously signaled that it was not going to change the interest rate anytime soon, so the market will remain focused on the commentary. Traders will pay special attention to Fed’s economic projections which will show whether Fed’s view of the economic rebound has changed.

The huge $1.9 trillion stimulus package may push inflation to higher levels, but the Fed was not concerned about higher inflation in its previous comments. Most likely, Fed Chair Jerome Powell will remain focused on the state of the job market which has not recovered from the blow dealt by the pandemic.

At the same time, Powell must find words to calm bond traders as Treasury yields have increased materially since the beginning of the year.

Treasury Yields Move To New Highs
Bond traders remain nervous ahead of the Fed Interest Rate Decision and sell U.S. government bonds, pushing their yields higher.

Currently, the yield of 10-year Treasuries is trying to settle above 1.66%, while the yield of 30-year Treasuries is testing the 2.41% level. It should be noted that Treasury yields have already recovered to pre-pandemic levels as traders expect higher inflation after the new round of economic stimulus.

Higher yields may put more pressure on tech stocks. Big tech stocks like Tesla, Apple, Facebook are down by more than 1% in premarket trading. If Jerome Powell fails to calm bond markets and yields continue to move higher, tech stocks will find themselves under more pressure.

Housing Starts Declined By 10.3% In February
The U.S. has just released Building Permits and Housing Starts reports. Building Permits decreased by 10.8% month-over-month in February compared to analyst forecast which called for a decline of 7.2%.

Housing Starts declined by 10.3% month-over-month while analysts expected that they would grow by 2.3%.

Housing market reports were weaker than expected, but it remains to be seen whether they will put additional pressure on the stock market as traders remain focused on the Fed.

Subscribe to our newsletter

Don't miss new updates on your email