• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock No Signs of an Interest Rate Pause: Stocks Down, Gold Up
Stock

No Signs of an Interest Rate Pause: Stocks Down, Gold Up

by May 3, 2023
by May 3, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

Today was Fed Decision Day, and investors were disappointed. No definite pause in interest rate hikes, but maybe just a little hint.

As expected, the Fed raised interest rates by 25 basis points. This brings interest rates to the 5.0%-to-5.25% range. The last time rates were this high was in 2007.

A Little Cooling, but Not Enough

It shouldn’t come as a surprise that the main reason behind the Fed’s decision was that, even though economic expansion in the US has moderated, overall, inflation is still elevated. Plus, job gains are still robust and unemployment is still low.

According to Powell, the pace of economic growth this year continues to be modest, even though consumer spending is strong. There are signs that supply and demand in the labor market are moving towards being more balanced, but there’s still a lot of excess demand.

The Fed continues to be committed to bring inflation back to its 2% level. It’s important to achieve price stability because, without it, the labor market won’t reach a level that will benefit everyone.

A bigger concern among investors is when and if the Fed intends to pause interest rate hikes. While Chairman Powell didn’t say that the Fed would pause raising rates, he did remove the language of anticipating rate hikes. This was a change of tone from previous statements but, overall, his comments were noncommittal. The door is left open for further rate hikes if it’s warranted. It all depends on incoming data. Powell did say that inflation is likely to come down; if that happens, there’s a chance the Fed will pause raising rates.

But the Chairman’s comments weren’t enough to ignite a bullish reaction from the stock market. Maybe the market was looking for more of a definite statement instead of the “inflation is still above 2%, and we still have a long way to go before we get there.” Chairman Powell’s comments still had a hawkish tone.

The Market’s Reaction

The broader indexes closed lower and all 11 S&P sectors closed in the red. The S&P 500 index ($SPX) fell 0.70% to close at 4090.75. Not exactly the direction investors were hoping for, and it continues its choppy movement.

CHART 1: S&P 500 INDEX FALLS AFTER FED’S PRESSER. The S&P 500 continues its choppy sideways move.Chart source: StockCharts.com. For illustrative purposes only.

But gold prices rose. Gold prices have been rising since November 2022. After reaching a high in April, gold prices pulled back. But the last two days saw gold prices rise. Could this be a sign of flight to safety?

 CHART 2: GOLD PRICES RISE. Is this a sign of flight to safety? It’s worth keeping an eye on gold prices.Chart source: StockCharts.com. For illustrative purposes only.

A key point is how rate hikes have impacted the regional banks. Even though Chairman Powell commented that the US banking system is sound and resilient, the higher loan rates reduce demand for loans and increase liability costs for the banks. This puts a dent in a bank’s profits. Raising interest rates further could make it more difficult for banks, and we could see more troubled banks surface. This could result in a decline in consumer spending and a slowing of economic growth.

And let’s not forget the debt ceiling. Although Powell didn’t say too much about this, he did say that, if the debt ceiling isn’t raised in a timely manner, there could be adverse consequences.

So there are still a lot of uncertainties in the economy which are going to be reflected in the stock market’s price action. But the CBOE Volatility Index ($VIX) is still below the 20 level, which indicates that investors are complacent.

The Final Word

Fed Chairman Powell’s comments didn’t do much to excite the markets. The consolidation continues in the equity markets until the next significant event. What that’s going to be is anyone’s guess.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

You Might Also Like
  • When News Moves So Fast, Stocks Can Stand Still
  • September: Exit Light, Enter Night
  • These 4 Chinese Stocks are Worth a Look
  • History Tells Us We’re Going A LOT Higher
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Empowering Your Trading Journey: Handpicked Trading Books Every Trader Should Read
next post
Michigan passes bill to protect abortion-seekers from discrimination

You may also like

Stock Market Indexes Shatter Critical Support Levels. Watch the March...

October 27, 2023

The Wisdom of Jesse Livermore, Part 3

May 4, 2023

Nothing “CRYPTIC” About These Go Trends!

January 13, 2024

Equities Remain in Strong “Go” Trend, Edging Ever Higher

December 2, 2024

The Biggest Problem with Technical Analysis? Part 2: Trend Following!

July 31, 2023

PayPal Stock Price Breaks Out: How to Take Advantage of...

August 26, 2024

Volatility ($VIX) May Be Providing Clues of a Big Market...

February 3, 2025

NASDAQ New High/New Low Ratio and Risk

March 1, 2023

DP Trading Room: Market Holds Its Breath

May 1, 2023

Top Five Charts of 2023 #3: Market Breadth Indicators

December 21, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right Now

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025
    • U.S. foreign tax bill sends jitters across Wall Street

      May 30, 2025
    • Amazon taps Xbox co-founder to lead new team developing ‘breakthrough’ consumer products

      May 30, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,765 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,472 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,451 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,432 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,308 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right...

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Rules-Based Money Management – Part 6:...

    May 23, 2024

    Energy Stocks in the Spotlight: A...

    September 6, 2023

    Top 5 Breadth Indicators You Can’t...

    October 28, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here