The Fed has paused but more rate hikes are expected

Wall Street finished mixed yesterday

On Wednesday the S&P 500 finished almost flat with a small gain of 0.08% while the Nasdaq closed with a profit of 0.39%.

The Dow Jones, however, finished the trading session with a loss of 0.68%.

At the beginning of the day, the S&P 500 started well in profit, but after the hawkish Fed's announcement, investors decided to sell the stocks.

The investors' sentiment remains in Extreme Greed, as indicated in the graph below:

Sentiment indicator - Fear & Greed Index


The market sentiment is 82, in “Extreme Greed” mode, up from yesterday's reading.

The Fed's pause

Yesterday, for the first time in 15 months and after 10 consecutive interest rate increases, the Federal Reserve announced to keep the interest rates unchanged this month.

The decision, to maintain the federal funds rate between 5% to 5.25%, was widely expected because the latest inflation data released on Tuesday showed a decrease to 4%.

In order to reach the inflation target of 2%, however, there is still work to do and Jerome Powell, during the press conference yesterday, mentioned that the target could be reached in 2 years.

Fed officials believe it will be appropriate to raise interest rates in 2023 to bring down inflation, so the monetary policy tightening could start again next month or in the near future.

The FOMC is planning to hike the interest rate by 50 basis points before the end of this year.

On Wednesday, the report about the US producer prices showed a decrease of 0.3% month over month in May, more than economists had forecasted.

What to watch today

At 13.30 GMT+1, the US is expected to release its May retail sales data.

At the same time will also be published the weekly initial jobless claims.

Financial markets could be volatile today.

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