At 2:00 p.m. today, the Federal Reserve will announce its monetary policy. Markets overwhelmingly expect the Fed to raise rates by at least 25 bps. This represents the first rate hike in three years.
The Fed last raised rates in 2023 under then-Fed Chair Jerome Powell. Since June, debt markets priced in substantial rate increases. The 20+ Year Treasury Bond ETF (TLT) fell from around $88 in late June to close at $80.71.
Stock markets panicked when the 10Y Treasury bond (IEF) headed to 5.00%. It peaked at 5.05% on Tuesday morning before backing down. Rising yields increase the cost to borrow. That would slow the economy.
Investors cut their exposure to companies sensitive to an economic slowdown. Restaurant stocks fared poorly yesterday. The drop in shares of Chipotle (CMG), Darden Restaurants (DRI), McDonald’s (MCD), Domino’s (DPZ), and Starbucks (SBUX) might create a buying opportunity.
Consumer cyclical stocks are also falling quickly. Casey’s General Stores (CASY) is still dropping after its recent earnings report. Ulta Beauty (ULTA) and Best Buy (BBY) are in an uptrend.
Automotive stocks like Carvana (CVNA) fell by 5.6%. Nike (NKE) continued its yearlong downtrend by closing at $36.22, down by 2.24%. Deckers Outdoor (DECK), Lululemon (LULU), and Burlington Stores (BURL) are also struggling to shake off a sell-off.
