Fed: Two More Hikes in '18 Before Picking Up the Pace

For the most part, the Fed did exactly what the market wanted on Wednesday. It raised rates by a quarter point, as widely expected, and is still planning only two more hikes for the rest of 2018. However, while the major indices spent most of the session on positive ground, they rushed to the exits before the closing bell.

The sudden reversal probably had something to do with the “dot plot”. Basically, the central bank raised its rate projections for 2019 and 2020. Plus, the Fed could always decide to add an extra hike this year in subsequent meetings.

“Simply put, the Fed doesn't want to do too much, but they don't want to do too little. Traders took this as a more hawkish view and sold stocks into the initial pop. With the wide trading range today, nothing was really accomplished technically speaking,” said Jeremy in Counterstrike.

The major indices seemed on their way to a solid performance on Wednesday, but ended the day with slight losses. The NASDAQ was off 0.26% to 7345.3, the Dow was down 0.18% to 24,682.3 and the S&P also slipped 0.18% to 2711.9.

In the portfolios, Home Run Investor and TAZR Trader each sold double-digit winners, while HRI also bought a new position. Learn more in the highlights section below along with some other analysis from the services.

Today's Portfolio Highlights:

Home Run Investor: Brian Bolan added a steakhouse on Wednesday that’s way more than just the sizzle. Earnings estimates for Ruth’s Hospitality Group (RUTH) are on the rise since it beat the Zacks Consensus Estimate in its most recent quarter. The largest fine dining steakhouse company in the country is now a Zacks Rank #2 (Buy). The last 60 days have seen four positive revisions for this quarter and year, along with three for next quarter and two for next year. The editor likes to see all that upward activity. Meanwhile, Brian also sold Casella Waste Systems (CWST) for a positive return of approximately 90%! Read more about today’s moves in the complete commentary.

TAZR Trader: With so many uncertainties floating around these days, Kevin didn’t want to carry too much risk into today’s Fed decision. Stocks could have tumbled if Powell & Co. were overly hawkish. Therefore, the editor sold NASDAQ 100 3X Bull ETF (TQQQ) this morning before the announcement…and banked 29% in about a month and half. Once the picture is clearer, Kevin will be re-deploying capital.

Momentum Trader: "Looking back on the dot plot from three months ago, the 2018 range has contracted. This contraction is signaling a current consensus of 3 rate hikes total for this year. The shift comes in 2019 and 2020 numbers as the plot has moved higher in both of those years. There’s even an extreme case in both of these where one Fed governor is really throwing the dot far out there.

"The highest prediction for 2019 is 3.75% while there’s a target number a full percentage higher than that for 2020. Granted it’s tough to predict where these rates will actually come in, this dot plot is giving us a pretty good roadmap for where rates could potentially be.

"The moral of the story is rates are on the rise and cash is not the place to be. Which is actually great news for those out there seeking better risk-free rates. Guaranteed income streams should finally be back on the uptick.

"A little whipsaw action for the market today following the FOMC’s rate decision. I bet the selling lets up after a gap lower in the morning. I don’t think the market saw anything in that dot plot that we didn’t already suspect was coming. We should get back to carving out a trading channel tomorrow." -- Dave Bartosiak, who also heads Surprise Trader and the new Blockchain Innovators.

Have a Good Evening,
Jim Giaquinto

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