Coffee With Greta: Fed Week Begins
Editor's Note: Coffee With Greta is a FREE morning update from our newest contributor Greta Wall. Want to get it by email every day? Click here.
********
DJIA Futures: +169 (+0.5%)
SPX Futures: +15 (+0.4%)
NASDAQ Futures: -12 (-0.1%)
Good morning friends!
Futures are mixed as the market gears up for a new week of trade with the Fed set to meet.
Let’s get right to it!
Fed in Focus
Traders are eyeing the Federal Reserve as the Central Bank prepares to meet.
The Federal Open Market Committee meets Tuesday and Wednesday.
The bank is expected to enact its first rate hike since 2018 and provide more clarity on plans for the balance sheet runoff.
CME Group’s FedWatch Tool shows nearly 95% of traders believe the Fed will raise rates by 0.25%.
Chairman Jerome Powell recently told Congress the war in Ukraine poses “uncertain” risks to the U.S. economy but the bank has no plans to alter monetary policy at this point.
The Fed is under pressure to get inflation under control after the CPI hit a fresh 40-year high at 7.9% in February.
Oil Prices Fall
Oil prices are falling amid optimism over talks between Russia and Ukraine.
West Texas Intermediate crude futures are down 4.2% to $104.74 per barrel with Brent crude futures falling 3.5% to $108.73 per barrel.
U.S. gas prices cooled over the weekend after hitting a fresh record last week.
According to AAA the average price for a gallon of regular gasoline is $4.325 today.
Although the pace of increases slowed over the weekend, that’s up from $4.065 a week ago.
Russia, Ukraine Hold Talks
Ukrainian and Russian officials resumed peace talks over video today.
Ukraine is still seeking to establish a cease-fire and wants all Russian troops to immediately be withdrawn from the country.
Ukraine says two civilians were killed and three were injured in a Russian shelling attack on a residential building in the Obolon district of Kyiv.
It’s unclear if Russia will agree to Ukraine’s demands after reports emerged that Moscow has requested military equipment from China to help in its invasion of Ukraine.
Russia and China both denied those reports.
Treasury Yields Rally
U.S. Treasury yields are rallying ahead of the Fed meeting this week.
The yield on the 10-year Treasury bond jumped more than eight basis points to 2.08% today, the highest it’s been since July 2019.
The 30-year yield is also up eight basis points to 2.44%.
China Lockdowns Prompt Supply Chain Worries
China locked down the city of Shenzhen over the weekend, with all non-essential businesses closed or working from home.
The city is a major manufacturing hub and the fourth largest port in the world.
Apple (AAPL) supplier Foxconn is among the businesses that have been shutdown.
The lockdown is likely to worsen the supply chain issues and inflation pressures in the U.S. economy.
Only 400 cases of Covid have been confirmed in the city but China has followed a “zero Covid” policy amid the pandemic.
Other major cities, including Shanghai and Beijing are on the brink of a lockdown as well.
The lockdowns prompted a sell-off in Chinese stocks.
Hong Kong’s Hang Seng Index fell 5.0%, while the Shanghai Composite dropped 2.6% and the Shenzhen Component fell 3.1%.
In Case You Missed It
- The U.S. Treasury Department added more than 20 new Russian elites to the list of sanctioned individuals Friday. They include the family of Kremlin spokesman Dmitry Peskov, Russian parliament members, the management board of VTB Bank, and one Russian oligarch. The sanctions also target two Russian nationals who helped North Korea obtain material for nuclear weapons.
- Congress passed a $1.5 trillion omnibus spending bill to fund the government through the end of the fiscal year on September 30. The legislation includes $13.6 billion in humanitarian and security aid for Ukraine. Covid relief funding was scratched from the bill after Republicans said it was a non-starter issue. President Biden is expected to sign the bill into law this week.