US stocks plunged sharply overnight, following Fed’s decision to maintain the interest rate at 5.25-5.50%. While Fed finally dropped tightening bias, indicating the peak of the tightening cycle, it firmly dismissed the possibility of an imminent rate cut in March.
Chair Jerome Powell’s statement during the post-meeting press conference was clear: “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March is the time to do that”.This comment has effectively quashed hopes for an early rate cut.
Policy loosening is still underway, echoing December’s dot plot. Powell said, “We believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint, at some point this year.”
- Fed Review: In a Risk Management Mode
- FOMC Removes “Bias” To Tighten, but Don’t Expect Imminent Easing
- Fed Holds Rates, Signals No Rush to Start Cutting
In response to these developments, DOW closed down -317.01 pts or -0.81% at 38150.30. Near term focus is now on 37795.71 support. Decisive break there will confirm initial rejection by 100% projection of 28660.94 to 34712.28 from 32327.20, possibly on bearish divergence condition in D MACD too. That would kick start a correction phase back to 55 D EMA (now at 36856.81).
Similarly, for S&P 500, break of 4802.40 support will confirm short term bottoming, after rejection by 100% projection of 3808.86 to 4607.07 from 4103.78, on bearish divergence condition in D MACD. Deeper correction should then be seen to 55 D EMA (now at 4697.73).
