Stock Market Update

[BRIEFING.COM] The policy directive issued today by the Federal Open Market Committee (FOMC) made it clear that there is a new manager at the helm. It was a very brief statement, bereft of any language signaling a policy bias.

If there was any nod toward a bias, it might be in the directive's last sentence: "The Committee will deliver price stability."

Yes, that was the concluding line to a directive showing a 12-0 vote to leave the target range for the fed funds rate unchanged at 3.50-3.75%.

There was a nod toward the uncertainty produced by the conflict in the Middle East, yet there was also a nod to productivity growth and capital investment being strong.

This meeting also produced an updated Summary of Economic Projections (SEP), which showed the washing out of any rate cut in 2026, according to the median projection, which now sits at 3.8% versus 3.4% previously. That makes sense, however, considering the SEP also featured upward revisions to the projections for 2026 PCE inflation (3.6% from 2.7%) and core PCE inflation (3.3% from 2.7%) that are well above the Fed's 2.0% target for inflation. Moreover, the projections for 2027 PCE inflation and core PCE inflation were bumped up to 2.3% and 2.5% from 2.2% and 2.2%, respectively.

There was some knee-jerk selling on these developments in both the Treasury market and the stock market. The 2-yr note yield, at 4.06% before the releases, shot up to 4.15% before pulling back to 4.13%, and the 10-yr note yield, at 4.43% in front of the releases, kissed 4.47% before pulling back to 4.45%. The S&P 500 dropped from 7,518 to 7,445 before finding support that has taken it back to its current level of 7,472.

Market participants are now waiting on Fed Chair Warsh's press conference to start at 2:30 p.m. ET, but if the directive is any indication, it, too, will likely be a shorter affair than the press conferences held by former Fed Chair Powell. Stay tuned. The market is awaiting its cue from the new manager of monetary policy.