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  • Writer's pictureKevin Hurley

Marketbites: Federal Reserve Projects Mild Recession


Portfolio Manager Commentary:

Stocks fell Wednesday on recession fears despite the release of cooler-than-expected inflation data. The Dow Jones Industrial Average snapped a four-day win streak, shedding 0.11%. Earlier in the day, the index was up by more than 200 points. The S&P 500 declined 0.41% to 4,091.95. Meanwhile, the Nasdaq Composite fell by 0.85% to 11,929.34. Those moves come after minutes from the Federal Reserve’s March policy meeting showed officials feared the economy could tilt into a mild recession later this year in light of the U.S. banking crisis.

“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” read the meeting summary on Wednesday. Additional comments came from Richmond Federal Reserve President Thomas Barkin who said that, while peak inflation may be behind the U.S., “we still have a ways to go.”

On Friday, the health of the U.S. economy and consumer will be put to the test as first-quarter earnings season kicks into full gear. Banking behemoths JPMorgan Chase, Wells Fargo, and Citigroup are on deck, as well as health-care giant UnitedHealth.

Chart of the Day:

U.S. inflation eased in March to its lowest level in nearly two years, but underlying price pressures likely keep the door open for the Federal Reserve to consider another interest-rate increase at its May meeting. Consumers saw lower prices last month for gasoline, groceries, medical care, and utilities. Conversely, there were higher prices for shelter, airline fares, and insurance, the department said.

Inflation remains elevated, well above both the 2.1% average we saw in the three years before the pandemic and the Fed's 2% target.

Source: WSJ

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