Why Everyone Is Watching The Fed Right Now
In a Nutshell
The Fed is now signaling a potential pause on rate hikes, with the probability of another increase dropping from 75% to 49% after weak JOLTS job data. Tomorrow’s PCE inflation and ADP employment reports will be critical in determining the Fed’s next move. Traders profited on short positions in Oracle and MSTR, while Micron’s earnings tonight could trigger a major move above $1,100 or back toward $900.
These notes were generated by AI and may contain inaccuracies.
For the first time since the Federal Reserve raised interest rates this month, it now appears that the Fed is heading towards a pause. The Federal Reserve Interest Rate Watch tool shows the probability of a rate hike has dropped from approximately 75% yesterday to 49.4%. For the first time, there is a 50% probability (the most likely outcome) that the Fed will stop raising rates after 4 weeks, 14 hours and 38 minutes.
The JOLTS job data may have provided enough uncertainty that the labor market is already so weak that there is no point in raising interest rates further.
Tomorrow, Wednesday, the Personal Consumption Expenditures (PCE) report will be released, along with the ADP Non-Farm Employment Change report. The ADP report will be released 1 hour and 15 minutes before the markets open. The main focus tomorrow will be on inflation. The Personal Consumption Expenditures (PCE) Index is the Federal Reserve's preferred measure of inflation.
Micron will be announcing its earnings after the markets close. Oracle stock was one of the main short-selling trades, with the stock rising to record highs of nearly 144. It provided a remarkable pattern of reversal from an overbought zone, where its price rose for no reason, then quickly led to a correction. A profit of $4,600 was made from the Oracle short position, which was completely closed.
The MSTR stock trade started in the green when sold short, then bought on the dip, but the price continued to fall. The situation turned to a loss, then reached the breakeven point, then returned to profitability by entering into long and short trades several times. The net result was a profit of $941 on MSTR. Trading typically occurs with at least $100,000, even in small positions like MSTR, so the $941 profit represents approximately a 1% gain. The loss is equivalent to about 1%.
Micron stock is currently trading at around $1065. The previous resistance level was at $1100, and the previous support level was at approximately $900. The question is whether Micron's stock will rise after the earnings announcement and return to previous highs, or will it break support due to this reversal at the peak of buying and return to the downward trend towards the 900 levels.
The pre-market session is likely to be very active given the large amount of data that will be released. When it comes to reporting personal consumption expenditures and non-farm payroll changes, the market needs enough time to determine its direction before making any rash decisions. The question to ask is whether trading is based on a genuine opportunity or simply overtrading.
The big news right now is the Fed's monitoring tool, where the likelihood of raising interest rates has decreased, while the likelihood of holding them steady has increased. After tomorrow's reports, it will be seen whether these possibilities will actually change.
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