FOMC Set to Raise Rates, Crypto Market Waits for Inflation Ease, Stocks Rally in January
The Federal Open Market Committee (FOMC) is widely expected to raise the federal funds rate by a quarter percentage point on Wednesday, slowing its pace for a second straight session. Investors will be closely watching the Fed’s commentary to assess when the central bank intends to stop hiking rates altogether, as market pricing puts the chance of a similar hike in March at 82.5%. The move would lift the Fed Funds rate to a range of between 4.5% and 4.75%, well above the current rate of 4.5% and 4.75%.
Jerome Powell, the Chair of the Federal Reserve, has been firm in his stance that he will not reduce rates until inflation has decreased substantially. Traders who expect rate cuts this year have been met with resistance from Powell. In January, stocks have been on the rise despite Chairman Powell’s cautioning of interest rates staying “higher-for-longer”
CoinMarketCap reported that Bitcoin (BTC-USD) had a 1% decrease in value over the past 24 hours, now standing at $23,168. The biggest cryptocurrency is in the midst of its most successful January since 2013, according to Bloomberg, as investors anticipate that both monetary tightening and the sector’s crisis are fading away.
Meanwhile, the S&P 500 (^GSPC) is headed for its best January since 2019 when it gained nearly 8%, with the broader market index up 5.2% for 2023 following a 19% loss last year.
Treasury yields were higher ahead of the Fed rate decision on Wednesday, with the 10-year yield (US10Y) up 2 basis points to 3.54% and the 2-year yield (US2Y) up 4 basis points to 4.25%. The 10-year U.S. Treasury yield ticked higher to 3.55%.
The week is also set to include the release of a flurry of heavyweight earnings reports, with the Dow Jones Industrial Average (^DJI) falling nearly 0.4% and the Nasdaq Composite (^IXIC) declining by roughly 1.17% as of 2:05 p.m. New York time.
The tech-heavy Nasdaq 100 dropped nearly 2%, weighed by declines in Microsoft Corp., Apple Inc., Nvidia Corp. and Tesla Inc.
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