Day Traders Diary

5/3/23

The major averages pulled back again after the Federal Reserve raised rates by 25 basis points, as was widely expected, and remained hawkish about slowing inflation and the economy. The Dow Jones Industrial Average closed lower by 270 points, or 0.8%. The S&P 500 fell 28 points or 0.7% while the Nasdaq Composite is down 55 points or 0.46%.

 Earlier bullish sentiment was dented somewhat after Fed Chair Jerome Powell ruled out cutting interest rates because he did not expect inflation to come down quickly enough.

However, traders were focusing on what the Fed didn't say this time in its post-meeting statement. The central bank appeared to soften its language about future rate increases by dropping a line from the March statement that said, "the Committee anticipates that some additional policy firming may be appropriate."

Powell commented to the press after the statement's release that dropping that language was a "meaningful change" and that the central bank's June decision would be driven by incoming data.

Ed Moya, senior market analyst at Oanda said Wednesday's rate increase, which marks the central bank's 10th consecutive hike, "will likely be the last one in this cycle."

The SPDR S&P Regional Banking ETF (KRE) declined 0.8%, reversing its earlier gains of more than 2%. The regional banking ETF fell more than 6% during Tuesday's trading session. Shares of PacWest gained 4% after losing nearly 28% the prior day. Western Alliance shares were also up 2%.