A full recap of the Fed rate decision and the Powell remarks ...

The Federal Reserve concluded its January policy meeting ... Wed, Jan 26 20223:23 PM EST ... The Dow was down about 350 points, or 1%. SkipNavigationMarketsBusinessInvestingTechPoliticsCNBCTVWatchlistInvestingClubPROMenuWed,Jan2620223:23PMESTStockshitfreshsessionlows,ratesriseamidPowellremarksThemajoraverageshitfreshsessionlowsataround3:20p.m.ET,astradersassessedFedChairmanJeromePowell'scommentsonmonetarypolicyandthepotentialforevenmoreinflationgoingforward.TheDowwasdownabout350points,or1%.TheS&P500andNasdaqCompositedipped0.9%and0.7%,respectively.Meanwhile,ratesroseasPowellspoke.Thebenchmark10-yearyieldtradedaround1.83%,andthe2-yearratetradedat1.1%.VIDEO3:0303:03It'sourjobtogetinflationdowntotwopercent:FedChairPowellPowerLunch—FredImbertWed,Jan2620223:15PMESTWewilleventuallygetreliefonthesupplyside,PowellsaysVIDEO3:5403:54Wewilleventuallygetreliefonthesupplyside:FedChairPowellPowerLunch—FredImbertWed,Jan2620223:07PMESTPowellsaysthereisupsiderisktoinflationJeromePowellsaidthatthere'sariskthatinflationwillnotdeclinebacktowarditspre-pandemiclevelsanytimesoon,andthattheriseinpricescouldaccelerate."InflationrisksarestilltotheupsideintheviewsofmostFOMCparticipants,andcertainlyinmyviewaswell.There'sariskthatthehighinflationweareseeingwillbeprolonged.There'sariskthatitwillmoveevenhigher.So,wedon'tthinkthat'sthebasecase,but,youaskedwhattherisksare,andwehavetobeinapositionwithourmonetarypolicytoaddressalloftheplausibleoutcomes,"Powellsaid.PowellalsomentionedthatsupplychainissuesweretakinglongertoberesolvedthantheFedhadoriginallyanticipated.—JessePoundWed,Jan2620223:08PMESTStocksgiveupsharpgains,Dowdownmorethan200pointsStocksgaveuptheirsharpgainsfromearlierintheday,astradersweighedFedChairmanJeromePowell'scomments.TheDowtradedmorethan200pointslower,or0.6%.TheS&P500,whichhadrisenasmuchas2.2%,slid0.6%.TheNasdaqCompositewasdown0.6%,erasinga3.4%gain.—FredImbertWed,Jan2620223:04PMESTReducingthebalancesheetwilltakesometime,PowellsaysFedChairmanJeromePowellsaiditwilltakeawhileforthecentralbanktounwinditsmassivebalancesheetgoingforward."Thebalancesheetissubstantiallylargerthanitneedstobe,"Powelltoldreporters."There'sasubstantialamountofshrinkageinthebalancesheettobedone.That'sgoingtotakesometime.Wewantthatprocesstobeorderlyandpredictable."—FredImbert,JeffCoxVIDEO4:2604:26Shrinkingthebalancesheetisgoingtotakesometime,saysFedChairPowellPowerLunchWed,Jan2620223:01PMESTPowellhasto'walkatightrope'"ChairmanPowellhastowalkatightrope–heneedstocommunicatethattheFedis100%committedtobringinginflationbackdownto2%,whilenotcausingarecessionorstockmarketcrashbytighteningmonetarypolicytooquickly,"saidChrisZaccarelli,chiefinvestmentofficerforIndependentAdvisorAlliance."ThestockmarketisespeciallyvulnerabletohigherratesandtheremovalofthetailwindthattheFed'sassetpurchaseshaveprovidedforthepasttwoyears.Webelievetheeconomywillstayoutofrecessionandthebullmarketinstockswillcontinuethisyear,butweareconcernedthatthevolatilitywehavealreadywitnessedthismonthwillincreaseinthemonthsaheadandwouldexercisescautioninthenearterm,"headded.—PippaStevensWed,Jan2620222:51PMEST'Economynolongerneedssustainedhighlevelsofmonetarypolicysupport,'saysPowellFedChairJeromePowelltoldreportersonWednesdaythattheeconomyisstrongenoughonitsown,withoutintensemonetarypolicysupport."Inlightoftheremarkableprogresswe'veseeninthelabormarketandinflationthatiswell-aboveour2%long-rungoal,theeconomynolongerneedssustainedhighlevelsofmonetarypolicysupport,"Powellsaidduringapressconference."Thatiswhywearephasingoutourassetpurchases...andweexpectitwillsoonbeappropriatetoraisethetargetrangeforthefederalfundsrate,"addedPowell.—MaggieFitzgeraldWed,Jan2620222:50PMESTDowgivesupgains,drops100pointsTheDowJonesIndustrialAveragegaveupitsearliergains,afterFedChairmanJeromePowellsaidthere'sroomfortheFedtofurtherraiserates.TheDowtradedmorethan100pointslowerafterrallyingasmuchas517.94points.—FredImbertWed,Jan2620222:47PMESTLabormarketcanwithstandratehikes,PowellsaysTheFederalReservecanraiseinterestrateswithouthurtingtherecoveryofthelabormarket,accordingtoJeromePowell."Ithinkthere'squiteabitofroomtoraiseinterestrateswithoutthreateningthelabormarket,"Powellsaid.TheFedChairpointedtothefactthatjobopeningscurrentlyoutnumberunemployedAmericansasonereasonthatthelabormarketis"very,verystrong."Theheadlineunemploymentratehasfallenbelow4%,thoughlaborforceparticipationisstillbelowitspre-pandemiclevel.—JessePoundWed,Jan2620222:45PMESTPowellsaystheFediscommittedtopricestabilitygoalsFedChairmanJeromePowellsaidthathighinflationhasimposedsignificanthardshiponpeople,especiallythosestrugglingwiththehighercostofessentialslikefoodandhousing.Pricestability,headded,iskeyfortheFedtosupportalongexpansion."We'recommittedtoourpricestabilitygoals,"hesaidinthepressconference."Wewilluseourtoolsbothtosupporttheeconomyandastronglabormarketandtopreventhigherinflationfrombecomingentrenched."—TanayaMacheelWed,Jan2620222:43PMESTJimCarontoutsFed'sbalancesheetasthe"absolutecriticalpolicymeasureforthisyear."JimCaronofMorganStanleyInvestmentManagementsaidWednesdaythathehashiseyesontheFederalReserve'sbalancesheetasthe"absolutecriticalpolicymeasureforthisyear."HiscommentscomeaftertheFedsignaledaninterestratehikewillcomeinMarchandannouncedplanstoshrinkitsbalancesheet."ThebalancesheetisreallytheareathatIthinkthattheFedcanactuallystarttofinetuneatleastthebackendofthecurve…that'stheonlyrealwaythattheycankeepbackendshigher,"Caronsaid."Thereneedstobesomecomplementarymoveshere.Maybetheydolessratehikesandtheydomorewiththebalancesheet…it'sgonnamatteralotforassetprices."—KrystalHurWed,Jan2620222:39PMESTFedwatchingwagesasaninflationpressure,PowellsaysJeromePowellhighlightedthatrisingwages,somethingcentralbankerswantedtoseeformuchofthelastdecadeduringthepreviouseconomicrecovery,maybeanegativeinthefightagainstinflation."Wageshavealsorisenbriskly,andweareattentivetotherisksthatpersistentrealwagegrowthinexcessofproductivitycouldputupwardpressureoninflation,"theFedChairsaid.—JessePoundWed,Jan2620222:41PMESTStocksoffhighs,ratesriseasPowellnewsconferencekicksoffThemajoraveragestradedofftheirsessionhighs,asFedChairmanJeromePowellstartedtakingquestionsfromthemediaonthecentralbank'slatestpolicyannouncement.TheDowtradedabout300pointshigherafterjumpingtheabout500pointsearlierintheday.TheS&P500,whichwasupmorethan2%atonepoint,traded1.6%higher.TheNasdaqCompositewasup2.4%afterjumpingasmuchas3.4%.VIDEO7:3907:39ChairmanJeromePowelldeliversremarksafterFedleavesratesunchangedPowerLunch—FredImbertWed,Jan2620222:29PMESTClarityfromFedshouldcalmmarkets,investorsaysThemarketshouldbreatheasighofreliefaftertheFederalReserveprovidedsomeclarityonwhenandhowmuchitwillraiseinterestrates,accordingtoComericaWealthManagementCIOJohnLynch."Clarityonthetimingandextentofratehikes,aswellasthedegreeofbalancesheetreduction,shouldhelpcalmmarkets,"Lynchsaid."Webelieveleftuntonormalmarketforces,theU.S.Treasuryyieldcurvewillgraduallysteepengivenglobalcyclicalrecoveryandlessseverepricingpressures."—YunLiWed,Jan2620222:21PMESTTheFed'splansforshrinkingitsbalancesheetTheFederalReservedidnotspecifyinitsmainstatementwhenitmightbegintoreduceitsbondholdingsthathavecauseditsbalancesheettoswelltonearly$9trillion.ButinaseparatestatementreleasedWednesday,theFedsaiditwouldstartshrinkingthebalancesheetafterraisinginterestrates."TheCommitteeexpectsthatreducingthesizeoftheFederalReserve'sbalancesheetwillcommenceaftertheprocessofincreasingthetargetrangeforthefederalfundsratehasbegun,"thestatementsaid.Someinvestorshopedthecentralbankwouldholdoffonsheddingitsbondholdingsimmediatelywithratehikes.Theextrastatementcouldbeonereasonstockscameofftheirhighs.Wed,Jan2620222:16PMESTFedstatementwas'innocuous,'WellsFargo'sSchumachersaysWellsFargoratesstrategistMichaelSchumachercalledtheFedstatement"innocuous,"notingthatthecentralbank'scommentsontaperingwerelargelyexpected."It'sgoingtorevolvearoundwhat[ChairmanJeromePowell]saysaboutthebalancesheetatthepressconference,"Schumachersaid."Peoplearetakingthisasaprettymiddleoftheroadstatement,notalottodigest;lookingmoretothepressconferencetogetabetterread."—FredImbert,PattiDommWed,Jan2620222:11PMESTWhathaschangedinthenewFedstatementClickhereforacomparisonbetweenWednesday'sFederalOpenMarketCommitteestatementandthatofDec.13.—FredImbertWed,Jan2620222:08PMESTStocksjumpafterFedannouncementisreleasedThemajoraveragesjumpedtotheirhighsofthedayfollowingthereleaseoftheFed'slatestmonetarypolicyannouncement.TheDowJonesIndustrialAveragewasbrieflyupabout500points,or1.4%.TheS&P500gained2.2%,andtheNasdaqCompositeadded3.3%.Thebenchmark10-yearTreasurynoteyieldtickedhigherafter2p.m.ETto1.7995%.—FredImbertWed,Jan2620222:04PMESTFedkeepsratesunchangedTheFederalReservekeptinterestratesunchangedWednesday,butsignaledthataratehikemaybecominginMarch.Inastatement,thecentralbank'spolicymakingcommitteesaidaquarter-pointhikeislikelycomingsoon.ThatwouldbetheFed'sfirstratehikesince2018."Withinflationwellabove2percentandastronglabormarket,theCommitteeexpectsitwillsoonbeappropriatetoraisethetargetrangeforthefederalfundsrate,"thestatementsaid.—FredImbert,JeffCoxWed,Jan2620221:35PMESTAquicklookatthemarketsaheadoftheFeddecisionLet'stakealookatwherethemarketsstandroughly30minutesaheadoftheFeddecision:DowJonesIndustrialAverage:up314points,or0.9%S&P500:up1.6%,ledbygainsinthetechsectorNasdaqComposite:up2.5%,asMicrosoftsurged4.9%.10-yearTreasuryyield:1.78%,roughlyflatontheday2-yearTreasuryyield:1.028%,marginallyhigheronthesessionGold:down1.2%at$1,831.10perounceU.S.oil(WTI):up2.3%at$87.55perbarrelBrentoil:up2.2%at$90.17perbarrel—FredImbertWed,Jan26202212:42PMESTThesestockscoulddowellasinflationrisesWiththeFedexpectedtosignalitwilltightenmonetarypolicythisyeartostaveoffasurgeininflation,CreditSuissestrategistsearchedforstocksthatcoulddowellinthistypeofenvironment.ThefirmsaidearlierthismonththatenergynameslikeDevonEnergyandDiamondbackenergycouldoutperformwithinflationrunninghot.Intech,CreditSuissesaidHewlettPackardEnterpriseandMicronTechnologystandtobenefitfromthisrecentinflationarysurge.Readmoreabouttheanalysishere.—FredImbertWed,Jan26202212:35PMESTWhattoexpectfromtheFedTheFederalReserveisexpectedtosignalthatit'sreadytostartraisingratesassoonasMarch.It'salsoexpectedtosignalthatotherpolicytighteningmeasuresmaybetakentofighttherecentinflationarypressures."Wedon'texpectthemtosounddovish," MarkCabanaofBankofAmericatoldCNBConTuesday."Wedon'tthinktheFedisgoingtocomeoutandtellthemarketit'swrongforpricinginfourratehikesthisyear."Lastmonth,Fedofficialssignaledtheexpectedatleastthreeratehikesin2022.However,tradersarecurrentlytradingatleastfourrateincreasesforthisyear,accordingtothefedfundsfutures.—FredImbert,PattiDomm