For all the buildup to Wednesday’s Federal Reserve policy announcement — the first in nine years in which an interest-rate hike was considered — the result was a bit anticlimactic: The Federal Reserve held interest rates near 0%, downgraded its 2015 GDP growth forecast to account for beginning-of-the-year softness, and left it’s “dot plot” of rate expectations for 2015 unchanged.
That means the Fed still expects two interest-rate hikes this year, as it did in March, with four policy meetings left in the year. With the first liftoff expected in September, that means a second hike could come in October or December.
Investors yawned.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all gained 0.2%, while the Russell 2000 slipped by 0.1%.
Crude oil moved 0.2% lower after trading in a wide range during the session, closing below the $60-a-barrel level after a government report showed an inventory build. That weighed on energy stocks, which fell 0.3% as a group. That lifted the ProShares UltraShort Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers to a gain of 3.5% for the month-to-date.
Transportation stocks — which are lagging industrial stocks by a magnitude not seen since 2000, and which are down nearly 11% from their November high — were hit by a 3% loss from FedEx Corporation (NYSE:FDX) after the firm disclosed disappointing Q4 results. Both profits and revenues missed expectations, and the 2016 forecast also fell flat.
But, back to the main event.
The median forecast puts the federal funds rate at 0.625% at the end of the year, which is where the estimate was in March. However, the median forecast for year-end 2016 and 2017 has been lowered to 1.625% and 2.875%, respectively (down from 1.875% and 3.125%).
This remains well ahead of where the futures market is, which expects only a single rate hike around December.
In her post-announcement press conference, Fed chairman Janet Yellen noted that policymakers are still waiting for improvement in inflation and the labor market (specifically, wage gains) before moving to raise rates. But she also tried to stress that the exact timing of a rate liftoff isn’t as important as the trajectory of subsequent rate hikes — her attempt to diminish the drama surrounding the approach of the first rate hike since 2006.
Aside from the Fed, traders remained focused on the deteriorating situation surrounding Greece with eurozone officials not openly admitting their governments are preparing for Greek default and exit from the monetary union. The Greek prime minister reiterated his position that pension cuts would not be agreed to.
Technically, breadth remains a problem and undermines the appearance of overall stability as the Dow Jones keeps hanging out near the 18,000 level — a threshold first reached back in December.
For the third day in five sessions, a “Hindenburg Omen” was triggered — a warning sign that buying demand is narrowing.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
