We got something for everyone on Wednesday: Not only did we get Fed Chair Jerome Powell's press conference and news of a quarter-point rate hike, Janet Yellen also spoke.
Here's how I'd rate the news.
I'd give a "B" on bank deposits; Powell's "A-" was dropped to "B" on Yellen's comments.
Powell seemed to give a "hint, hint, wink, wink" that deposits will be insured, but he didn't come out and say that. He came as close as he could to turning implicit into explicit. Yellen seemed to go the opposite direction, offsetting his comments. She, after all, is likely more in tune with the politics of it getting done, which is likely to meld into the debt ceiling debate. I'm tempted to use "debacle," as I get more nervous on that. Powell, however, did a good job highlighting how unique the banks that were taken over were in terms of what risks they took.
On inflation-fighting and hawkishness, I'd give an "A" from an inflation standpoint, but a "B-" from a market standpoint. I think the strongest comment was when he said something along the lines that problems from fighting inflation are bad, but problems from inflation are worse. Markets still don't seem to believe they won't have to cut (expect them to hammer home on this). Markets also, rightfully so, are taking the hawkishness with a grain of salt as little evidence that the terminal rate or intention of the Federal Open Market Committee members to hike was materially different than last meeting.
I'm skewed toward a "risk-off" view here as, ultimately we were told, that inflation fighting is more important than the potential economy, at least based on what they know about the banking system as of now.
Stocks seem to be hoping for a reprise of last FOMC, where we got a strong rally after the meeting, followed by a huge move the next day. I don't see that developing and zero-day to expiration options aren't as heavily one-sided to the call side as they were back then.
