Wednesday's Close

E-mini S&P 500 Futures (September): Settled at 4213, down 23.50

E-mini Nasdaq-100 Futures (September): Settled at 13,972.75, down 49

A very minor shift in the Fed’s rate hike expectations has roiled risk assets and strengthened the U.S. Dollar. Via their dot plot, committee members now anticipate 2 rate hikes through the end of 2023. 

At the end of the day, the shift was very small, but it brought to life the reality that one day the Fed will tighten policy. In reaction, the yield on the 10-Year Treasury gained as much as 8.5 basis points, but at a high of 1.59%, it remains below last week’s high of 1.61%. U.S. equity benchmarks have so far weathered the storm very well with the S&P losing as much as 1.7% from Tuesday’s record high. 

It’s our belief that if the rate landscape remains somewhat stable, equity markets will only experience a very healthy pullback. However, due to U.S. Dollar strength, many commodity sectors are taking the brunt of the pain. Therefore, it remains to be seen how this will impact some corners of the market. 

One commodity sector that has held up very well is energy, which has helped exude some stability across equity markets. In fact, July crude oil is still up 1.5% on the week.

Weekly Jobless Claims missed this morning and came in at the highest since mid-May at 412,000. Also, Philly Fed Manufacturing came in just below expectations at 30.7 versus 31.0. This could work to stop the rise in the U.S. Dollar, buoying risk-assets. U.S. Treasury Secretary Janet Yellen testified before Congress on the 2022 Federal Budget at 9:00 a.m. CT.

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