Stock indexes are at new record highs as the US Federal Reserve leaves its benchmark rate on hold and reconfirms three rate cuts in 2024. The closely watched “dot plot”, which shows where officials expect rates to be in the future, showed rates ending the year at a range between 4.50% to 4.75%, equivalent to three -25 basis point cuts, unchanged from December.

The number of officials anticipating more than three cuts has declined to just one versus five in December, while the number of officials expecting less than three cuts remained unchanged at five.

Some bears argue this is evidence that Fed officials are growing less “dovish” (ie, fewer expecting more than three cuts). They also point out that interest rate projections for 2025, 2026, and longer-run all moved up. The Fed funds rate in 2025 is expected to average 3.9% (3.6% in December), 3.1% in 2026 (2.9% in December) and 2.6% longer-run versus 2.5% previously.

Bulls believe the pullback by some officials is a non-issue and point out that Fed forecasts tend to coalesce the closer the central bank gets to making a move. Bulls are also pointing to Fed Chair Jerome Powell’s follow-up comment that recent data hasn't "really changed the overall story, which is that of inflation moving down gradually, on a sometimes bumpy road, toward 2%." Powell mostly stuck to the Fed’s recent script that they need more evidence that inflation is moving toward the 2% target before cutting rates.

Powell also said that it will be appropriate to slow the pace of its asset runoff fairly soon, though he did not provide any details.

Overall, investors viewed the policy announcement and Powell’s comments as supportive of Wall Street’s current outlook. According to the CME’s FedWatch Tool, traders now place the odds of the first rate cut coming in June at more than 67%, up from 55% earlier in the week.

Taking a look at the Fed’s economic forecasts, officials expect “core” inflation (strips out food and energy) will end the year at +2.6% versus +2.4% in December while unemployment in 2024 is forecast slightly lower at 4.0% versus 4.1% previously.

Officials also sharply upgraded their outlook for 2024 GDP (gross domestic product projections) to +2.1%, compared with +1.4% in December. Investors will hear from Fed Chair Powell again on Friday at a “Fed Listens” event. Vice Chair Philip N. Jefferson and Governor Michelle W. Bowman will also participate.

Today, investors will be digesting Existing Home Sales, the Philadelphia Fed Manufacturing Index, and PMI Flash. The PMI read will likely attract a lot of attention because it is the first look at March economic activity and inflation.

Turning to earnings, there are several key releases on the calendar today, including Academy Sports & Outdoors, Accenture, Darden Restaurants, FedEx, lululemon, and Nike.

For what it's worth, the S&P 500, Nasdaq, and Dow all posted new all-time highs yesterday. The Nasdaq 100 is up over +38% the past 52-weeks. 

EPA Issues Landmark Rules to Curb Auto Emissions, Bolster EVs:  The EPA has finalized the rules limiting auto tailpipe emissions from cars, SUVs, and pickups, as part of a push to accelerate the U.S. transition to electric vehicles. The new rules follow a proposal issued in April and come as challenges to Biden administration auto standards are already underway. They set emissions rules for light-duty vehicles including cars, SUVs, and light trucks for model years 2027-2032. Biden administration officials told reporters the final rule provides more flexibility, including a slower ratcheting up of emissions limits, but gets to the same end goal as the proposal after feedback the EPA received to the proposed rule. The rules do not mandate that automakers transition their fleets over to sell more EVs by a certain date. But with tighter emissions curbs, manufacturers are likely to favor more EVs to comply with the rule. A fact sheet given to reporters shows that during 2030-2032 manufacturing years, carmakers may choose to produce 30% to 56% of new light-duty vehicle sales as battery electric vehicles, with the rest consisting of a mix of other clean vehicle technologies. Source Axios

>>> Mega Millions Lottery Jackpot Could Reach $1 Billion Friday: The Mega Millions lottery prize money has been building since the last winning ticket was sold over three-months ago. The prize money has been building for 29 consecutive drawings since the last winning jackpot Dec. 8. This is only the sixth time in game history that the jackpot has gone this high. The current all-time record jackpot was $1.6 billion set last August. Mega Millions tickets cost $2 per play and are sold in 45 states. The odds of winning the jackpot are roughly thought to be 1 in 302.6 million

Chipotle’s Board Approves 50-for-1 Stock Split: In a rare move on Wall Street, Chipotle Mexican Grill’s board has approved a 50-for-1 stock split. “This is the first stock split in Chipotle’s 30-year history, and we believe this will make our stock more accessible to employees as well as a broader range of investors,” Jack Hartung, Chipotle’s chief financial and administrative officer, said in a prepared statement. But despite approval from its board of directors, the split isn’t set in stone just yet. Chipotle still needs the green light from shareholders, which is expected in June. For what it's worth, a $10,000 investment in the stock back in 2006 would now be worth over +$1.3 million. Crazy!


Ukraine’s Attacks on Russian Oil Could Bring Geopolitics Roaring Back: Ukraine’s drone attacks on Russian refining operations are driving up oil prices and experts warn that more of the country’s energy assets could be vulnerable. Oil traders have been monitoring the fighting in Ukraine, but for most of two years the world has been well-enough supplied to largely ignore the implications of the impact of the Ukraine war. Russia’s one-time hold over Europe as its main energy supplier has been broken, with new supplies rushed in from the U.S. and Middle East. The attacks suggest that the market dynamics of the war may be shifting. Europe has reduced much of its dependence on Russian energy, but Russia remains a major provide to global energy markets. If Ukraine manages to disrupt Russian supply, it could bring geopolitics roaring back. Ukraine has targeted Russian energy assets since the onset of the war, but those attacks have recently intensified as Ukraine becomes more desperate for weapons. The weapons shortage has weakened Ukraine’s missile defenses, said Carlos Pascual, senior vice president for geopolitics and international affairs, S&P Global Commodity Insights. “They don’t have missiles, which will make them more vulnerable and inevitably will increase the risk they would use their sea drone capability against oil tankers, against oil infrastructure and refineries,” he said.  He believes the Ukrainians are fully aware of the global implications of their actions. “If the international community isn’t going to be able to provide support to them, it just increases the likelihood those attacks will become much more deliberate,” he said. Source Barrons

Sotheby’s Leans Into Sports: Sotheby’s is increasing its sports offerings, as the auction house looks to capitalize on the growing demand for sports memorabilia and draw in a younger demographic. The company on Wednesday announced its first “Sports Week,” which will include six live and online auctions with items from many of the biggest names in sports. The auctions will kick off April 5. Demand for athletic memorabilia has jumped in recent years, and sports has become one of Sotheby’s fastest-growing categories, the auction house said. The market for sports collectibles is massive, and only getting bigger. Consulting group Market Decipher estimated the valuation of sports memorabilia at $26.1 billion globally in 2021. The group predicts the market will explode in the coming years, reaching $227.2 billion by 2032. Sports has also brought a new, younger demographic into the market. Sotheby’s said its average client for sports memorabilia are 20 to 40 years old, and 50% of them are new to auctions. Some sales lead to more purchases in the contemporary and watch categories, Wachter said.  Source CNBC

Big US Corporations Aren't Waiting for the Fed: Big U.S corporations are borrowing at a pace not seen in years.Higher-rated companies had issued $462 billion in debt through mid-March, according to JPMorgan Chase, one of the highest levels in records going back to 2000. It's a sign that many corporate leaders have come around to a sunnier outlook about the economy after being on edge about a recession over the past two years, according to JPMorgan Chase's Eric Beinstein. Additionally, the bond issuance suggests that corporate leaders may have tapered their outlook on interest-rate cuts later this year—along with the rest of the market. Rather than wait around for rates to start falling, they're borrowing while interest is hot. Investors have piled into such higher-rated debt, sending spreads to some of the lowest levels since the financial crisis. Source WSJ


Reddit IPO Prices at Top of Range: Reddit Inc. and its selling shareholders raised $748 million, pricing shares in an initial public offering at the top of a marketed range, according to people familiar with the matter. The social media platform, along with its top executives and other employees, sold 22 million shares for $34 each, said the people, who asked not to be identified because the information wasn’t public yet. The shares were marketed in the IPO for $31 to $34. At $34 a share, Reddit has a market value of $5.4 billion based on the outstanding shares listed in its filings. Including stock options and restricted share units, Reddit’s fully diluted valuation is closer to $6.4 billion. That’s down from $10 billion in a funding round in 2021, when Reddit first launched its IPO plans. Source Bloomberg


US Warns Hackers are Targeting Water Systems: The U.S. government is warning state governors that foreign hackers are carrying out disruptive cyberattacks against water and sewage systems throughout the country. The letter singled out alleged Iranian and Chinese cyber saboteurs. National Security Advisor Jake Sullivan and Environmental Protection Agency Administrator Michael Regan cited a recent case in which hackers accused of acting in concert with Iran's Revolutionary Guards had disabled a controller, opens new tab at a water facility in Pennsylvania. They also called out a Chinese hacking group dubbed "Volt Typhoon" which they said had "compromised information technology of multiple critical infrastructure systems, including drinking water, in the United States and its territories." The digital safety of water and sewage plants has long been a concern for cybersecurity professionals because the facilities provide a critical service and can often be lightly defended. Source Reuters

Retail Sales to Rise as Slower Pace in 2024: The National Retail Federation yesterday forecast that retail sales will increase in 2024 between +2.5% and +3.5% to between $5.23 trillion and $5.28 trillion. The announcement was made during NRF’s fourth annual State of Retail & the Consumer virtual discussion on the health of the American consumers and the retail industry. The 2024 sales forecast compares with +3.6% annual sales growth of $5.1 trillion in 2023. The 2024 forecast is in line with the 10-year pre-pandemic average annual sales growth of +3.6%. Non-store and online sales, which are included in the total figure, are expected to grow between +7% and +9% year over year to a range of $1.47 trillion to $1.50 trillion. That compares with non-store and online sales of $1.38 trillion in 2023. NRF projects full-year GDP growth of around +2.3%, a slower speed than the +2.5% in 2023 but strong enough to sustain job growth. Inflation prices are also expected to moderate to +2.2% on a year-over-year basis, due to a cooling economy, the labor and product market coming into better balance and retreating housing costs. Source NRF


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