Key Takeaways with Craig

It was another day of wild swings in the stock market as US Equity Indexes spent most of the day in positive territory but wound up broadly lower.  Immediately after the FOMC announcement at 1:00 PM Central time, stocks, which were already trading higher, rallied but quickly returned to the levels at which they were trading prior to the announcement.  Then, as Federal Reserve Chairman Powell delivered his remarks, the major US Indexes turned lower and implied volatility, which had been trading lower, rose. 

Similarly, CME Group Treasury markets were little changed immediately after the FOMC announcement.  However, as Chairman Powell spoke, yields rose throughout the curve and implied volatility ticked up in the options markets.  We took snapshots of CME Direct prices in the Micro Treasury Futures and US 10-Year Treasury Note options before the FOMC decision (12:50 PM Central Time), 5 minutes after the FOMC decision (1:05 PM Central Time) and 15 minutes after Chairman Powell began his press conference (1:45 PM Central Time).  As you can see, neither Treasury yields nor implied volatility were significantly changed immediately after the announcement.  However, as you can see from the snapshot taken at 1:45 PM, yields from 2 through 10 years increased by about 6 basis points. 

By the end of Chairman Powell’s remarks, we’d seen a substantial flattening of the yield curve as the Micro 2-Year Treasury yield was up by about 12 basis points, the 10-Year up by about 6 and the 30-year up by just about 2.5 basis points.  CME’s Fed Funds futures prices reacted as well, as reflected in the FedWatch tool; the probability that the FOMC would raise its target rate by another 25 basis points in May (50 bps total) increased from 47.5% yesterday to 60.2% today and the likelihood that they’d raise its target range to 75-100 points by June increased from 41% to 55%. 

Finally, WTI Crude Oil futures prices came off of the days highest levels during the afternoon price break in equities, but were still trading higher in mid-afternoon action.  

Today's Future Price Action

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