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There is a slight bid in the equity futures market on the heels of yesterday's weak showing. We wouldn't glean much from the bid other than the idea that there is a modicum of buy-the-dip interest in the mega-cap stocks, which led yesterday's slide.
Currently, the S&P 500 futures are up 12 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 64 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 26 points and are trading fractionally above fair value.
Setting those indications aside, there isn't much to be gleaned from the early trading action given that everyone is waiting on the FOMC decision and Summary of Economic Projections (SEP) at 2:00 p.m. ET and Fed Chair Powell's press conference at 2:30 p.m. ET.
In truth, it is the SEP they are waiting on. The market knows the Fed won't be changing the target range for the fed funds rate today. It will remain at 4.25-4.50%, and we would expect that vote to be unanimous.
The intrigue surrounds the SEP and what it will show in terms of changes to the median forecast for GDP growth, PCE inflation, and rate cuts. Some previews suggest that, based on the uncertainty that has been injected by the tariff actions, the 2025 GDP growth forecast will be lowered (from 2.1%) and that the inflation forecast will be increased (from 2.5%).
The focal point for the market, ultimately, will be the median estimate for the federal funds rate. The December SEP projected two rate cuts in 2025, so at issue will be if the estimate changes to only one rate cut (bearish), remains at two (neutral), or increases to three (bullish).
The fed funds futures market, which got revved up a bit not too long ago and priced in three rate cuts this year, is now sitting with an expectation that there will be two rate cuts, with the first cut coming at the June FOMC meeting.
One should expect the overarching message from Fed Chair Powell to be that the Fed is waiting to see what policies are enacted, and their effects on economic activity, before making any additional policy moves. This commentary would not be a surprise, which is another reason why the SEP -- and all the estimates it holds -- is apt to be the real market mover.
We'll learn more starting at 2:00 p.m. ET. Until then, the stock market will pre-occupy itself with some individual corporate news items, such as the earnings report from General Mills (GIS), the Bank of Japan's unanimous decision to keep its key policy rate unchanged at 0.50%, the understanding that Russian President Putin has yet to agree to a full ceasefire in the war with Ukraine, a 6.2% week-over-week decline in the Mortgage Bankers Association's mortgage applications index, and Bank of America's (BAC) CEO telling CNBC that the consumer is spending about 6% more this year than at the same time last year.
There is a swirl of information out there, but the information everyone is waiting on won't be known until 2:00 p.m. ET. That's when today's trading action will take on more meaning.
