The Federal Reserve decision this afternoon is the main event, especially for how it hits longer-duration Treasuries - the 10, 20, and 30-year notes. The key question: will this be read as a hawkish hike or a dovish hike? A dovish hike means they raise rates but also point to bright spots in the economy, such as a labor market that recent data shows is mostly resilient, and the fact that services inflation is still low.
A rate hike today is almost fully priced in, and the signal now points to more hikes by the close of this year. At least one hike makes sense and is symbolic. The Treasury market wants an institution like the Fed to show restraint, responsibility, and accountability, which should help the long end of the yield curve.
Watching the Data
Retail sales this morning could move the needle for some Fed members. Core retail sales came in negative month-over-month for the last two months. A third negative print in a row would likely push the Fed toward a more pause-like tone.
2022 Comparison
There is fear tied to what happened in 2022, but the situation now is different. In 2022 the Russia-Ukraine conflict reset energy logistics lines across Europe, and the federal government ran heavy fiscal spending because of the COVID-19 pandemic. Rates started from a very low, inverted base, and the Fed raised from 25 basis points up to about 475 basis points of increases in a single year. That cycle is over. Looking at March comps for 2027, year-over-year base effects could be enough for the Fed to even cut rates within the next six months. A 25 basis point hike now is not the end of the world - it is symbolic, showing the Fed will act if services inflation gets out of hand. That pressure is not here yet.
Oil
Oil is pulling back today but stays in triple digits for both WTI and Brent crude. The 105 level has been key resistance; that level was pushed through yesterday, but prices are fading this morning. The Iranian foreign minister met the Chinese foreign minister, and China signaled it wants restraint in the Middle East and a resolution, possibly a return to the deal first signed. That meeting was set up only about two days ago, so it was rushed. China's comments matter more with President Xi and Trump meeting in about a week.
Other signs point to China taking a more active role: China started importing LNG from the United States, the first time since the tariff war; there is a global venture deal to export LNG to China for the next 20 years; and China has met about 50% of its total soybean buying commitments. The Trump-Xi talks could be both economic and geopolitical and might fold in the Iran conflict. Bloomberg has rumored a possible reduction in tariff rates. An overnight API report showed a large buildup in oil inventories; the EIA report later today will show whether that is confirmed.
Intel and SK Hynix
SK Hynix is reportedly in talks with Intel (INTC) to manufacture memory chips in the United States, specifically at the Ohio plant - a big political win for the Trump administration and Republicans if it happens. Two scenarios are reported: SK Hynix leases part of Intel's Ohio facility, or the two form a joint venture to develop the chips. This news is waking Intel (INTC) up. SK Hynix has publicly denied the reports, and Intel (INTC) has not confirmed them, so it is speculation for now. Chipmakers are trying to diversify supply chains beyond South Korea and Taiwan. The main hurdle is South Korean government approval, a very high bar, because South Korea treats high bandwidth memory and DRAM chips as national core technology not meant for export. Still, the rumor matches moves by other companies in this space over recent months.
S&P 500 Levels
The range this morning is wide. To the upside, 7680 holds most of the call activity. To the downside, puts sit around 7500. The market is pricing about a 1% move either way. Headline events land today, and Friday brings quarterly expiration, so volume should be relatively high. The index needs to hold the 50-day moving average by the end of this week to confirm a consolidation and rip higher rather than a consolidation and breakdown. From a technical view, the market is still in a consolidation pattern trying to hold the 50-day moving average.
