How To Trade Post FOMC Data? 😉
The Federal Reserve maintained the federal funds rate at its existing range of 5.25% to 5.5% during its September meeting, as largely predicted by the market.
The Fed statement reiterated that additional policy firming to bring inflation to the 2% target may be appropriate depending on the upcoming economic data, effectively keeping the possibility of a future rate hike on the table.
2-Yr Treasury Yields Rise To 16-Yr Peak
In terms of the dot plot, the median projection for 2023 remained consistent with June’s figures at 5.6%, indicating a preference for one more rate increase, potentially occurring at either the November or December meeting.
The median dot for 2024 showed a federal funds rate of 5.1%, implying a reduction of 50 basis points in rates from current levels. However, such a preference is effectively pricing out two rate cuts that had been anticipated according to June’s Fed economic projections. This shift could be perceived as hawkish by the market.
Higher for longer as highlighted
Furthermore, there has been a notable upward revision in the economic growth forecast for 2023, with the new projection at 2.1%, a significant increase from the 1% forecasted in June.
The tech-heavy Nasdaq 100 index plunged to late August lows after the Federal Reserve decided to keep rates steady at 5.25%-5.5% but indicated the possibility of a further rate hike by the close of 2023 and removing a series of anticipated rate cuts (50 basis points) for 2024.
Many analysts interpret this decision as a hawkish hold. Fed Chair Jerome Powell reiterated an intention to proceed meeting by meeting, but also emphasized the need to keep rates high for a longer period until there is confidence in inflation returning to the 2% target.
Bulls or bears winning this week?
Among S&P 500 mega caps, the worst performers included:
- Intel Corp. (NASDAQ:INTC), down by 4.6%.
- Alphabet Inc. (NASDAQ:GOOG) (NYSE:GOOGL), down 3%.
- Nvidia Corp. (NASDAQ:NVDA), down 2.9%.
- Netflix Inc. (NASDAQ:NFLX), down 2.4%.
- Microsoft Corp. (NASDAQ:MSFT), down 2.2%.
Sell covered call
Buy call
Buy call
Buy call
⚠️ Trading tips: 2 choices on Thursday - buy the dip of the strongest stock (TSLA) or short the weakest link (NVDA). Looking at SPY calls above 438.87 and puts below 437.06. Shall wait for the market to lead the direction 15-30 mins after opening.
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Earlier on in the FOMC meeting cycle, lots bought calls thinking they were free money.Now, puts look like free money.If there's no volatility, nobody profits.
It is without failure that the moment the rate announcement comes out, algos dump a ton of shares.