Fundamental Analysis

Equities Climb Ahead of FOMC Meeting Minutes

  • Investors are awaiting the release of the FOMC meeting minutes.
  • COVID cases continue to rise in China, prompting more restrictions.
  • The US dollar fell, showing improved sentiment as investors looked beyond China’s COVID.

Wednesday saw an increase in Equities and a decrease in US Treasury yields as investors anticipate the release of the Federal Reserve’s meeting minutes for guidance on US interest rates. The Fed will publish the minutes of its November policy meeting, providing an insight into how officials perceive the state of the economy.

Investors will look closely at the minutes from the Fed’s most recent meeting to see if there was any talk about slowing the rate of interest rate hikes. Jerome Powell, the chairman of the Federal Reserve, stated this month that although borrowing costs would need to increase further, future interest rate increases might be made in smaller steps.

Fed funds rate (Source: Federal Reserve Bank of New York
Fed funds rate (Source: Federal Reserve Bank of New York)

The rise in interest rates in 2022 has been steep. A pause or a slowdown would mean a more gradual increase in the peak rate.

“People will be poring over word-for-word those minutes to see if they tilt towards the Fed’s official statement versus what Powell’s press conference implied. He implied the Fed was not going to be looking at cumulative effect in considering when to stop this tightening,” said Tom Plumb, portfolio manager at Plumb Balanced Fund in Madison, Wisconsin.

Authorities in Beijing, China, closed parks and museums as the nation struggles with a rise of COVID cases. Regulations have been tightened for people entering Shanghai, raising concerns about the potential effects on the economy.

According to the National Health Commission, China recorded 29,157 new COVID infections on November 22 compared to 28,127 new cases on November 21. The authorities have closed several facilities as the number of cases in Beijing and Shanghai keeps increasing.

The US dollar fell broadly and lost some of the ground gained in the previous session as markets looked beyond concerns about China’s COVID flare-ups.

“The tentative recovery in risk appetite has been enough to stall the dollar’s several-day rebound,” said Joe Manimbo, senior market analyst at Convera in Washington.

This year, the dollar has strengthened due to the Federal Reserve’s massive interest rate increases to combat inflation. However, recent US consumer price figures that were lower than anticipated have given investors hope that the Fed will be able to slow the rate of hikes.