Day Traders Diary

6/16/21

The major averages dropped today but recovered off their lows after the Federal Reserve raised its inflation expectations and moved up the time frame on when it will hike interest rates next.

The Dow Jones Industrial Average fell 265 points or 0.77% after dropping as much as 382 points to 34,034. The S&P 500 fell 22 points or 0.5% to 4,223. The broad equity benchmark dropped as much as 1% in volatile trading as all 11 sectors fell into the red at one point. The tech-heavy Nasdaq Composite dipped 0.2% or 33 points to 14,039 after falling 1.2% at its session low.

The policymaking Federal Open Market Committee indicated that rate hikes could come as soon as 2023, after signaling in March that it saw no increases until at least 2024.

Major equity benchmark traded off their lows of the day after Chairman Jerome Powell said in a press conference that the so-called dot-plot projections should be taken with a "big grain of salt" and that the liftoff is "well into the future."

The central bank gave no indication as to when it will begin cutting back on its aggressive bond-buying program. The Fed has been buying $120 billion worth of bonds each month as the economy continues to recover from the coronavirus pandemic.

The Fed chief said that the central bank with provide "advanced notice" before announcing their move to taper asset purchases.

The Fed also raised its headline inflation expectation to 3.4% for 2021, a full percentage point higher than the March projection, but the post-meeting statement continued to say that inflation pressures are "transitory."

The meeting came as inflation heats up, with producer prices rising at their fastest annual rate in nearly 11 years during May, a report on Tuesday showed.

Powell said inflation could run hotter than the Fed expected amid the economic recovery.

Economic reopening plays provided the broader market with some support. Royal Caribbean and Carnival both climbed 2% after an upgrade from Wolfe Research.

On Wednesday, China said it will release industrial metals including copper, aluminum and zinc from its national reserves to curb commodity prices. Copper price has fallen more than 10% from its record high, dipping into correction territory on Tuesday.