Mid-Market Update: Stocks fluctuate awaiting geopolitical updates, Hawkish Fed Speak

The end of another long week has Wall Street bracing for another rollercoaster ride as investors digest President Biden’s crucial call with Xi and await to see if any possible pathways emerge for ending the conflict in Ukraine, all while roughly $3.5 trillion of single-stock and index-level options expire.  The days of seeing all the sectors in S&P 500 being green appear to be long gone. It could be a choppy ride as investors continue to rotate out of financials as the Treasury curve flattener trade appears to be here to stay and energy stocks might have hit their peak as traders have already priced in higher oil prices and strong margins going forward.  FAANG stalwarts have been oversold for too long and investors are gravitating to quality cloud and security stocks.

Fed Speak

James Bullard, the most hawkish Fed member, provided a statement on his dissent.  Bullard recommended a much more aggressive tightening path to fight inflation, suggesting that the Fed funds rate to rise above 3% this year.  Bullard also wanted to see the Fed implement a plan for balance sheet reduction this week.

Fed’s Waller told CNBC that the Fed should consider half-point rate increases at the next couple of meetings and that he would like rates above neutral by the end of the year. Waller is comfortable if the Fed begins the balance sheet runoff at the May or June policy meetings.

Wall Street is expecting a Fed that will front load their rate hikes and that should keep the flattener trade firmly in place.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya