Markets in the red as Fed meeting begins

Yahoo Finance’s Jared Blikre breaks down how markets opened on Tuesday.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Welcome back to "Yahoo Finance Live," everyone. Markets this morning, at least major averages, you're seeing them move lower across the board for the Dow, the S&P 500, and the NASDAQ. All of them down just a little bit more than 1%. For more on the early action in today's tape, let's get on over to Jared Blikre at the YFi Interactive. Jared.

JARED BLIKRE: That's right. We're gonna take a look at stocks first but then we've got to take a look at the US dollar and interest rates, because that is the action driving what you're seeing on the screen right now.

Now, we can see the Dow, S&P 500, NASDAQ, and the Russell 2000 small caps down more than 1%. Small caps down almost 1 and 1/2-- 1 and 1/2%. I'm gonna show you the sector action real quick. Everything in the red here, staples is the least dirty shirt in the laundry basket, followed by energy and financials. Materials taking it on the chin. That is all about the US dollar.

So let me show you what's going on with the Dixie right now. This is the US dollar index, the three-month chart. And we are racing higher to these highs here from a couple-- from actually last week. And that is a 20-year high. So this is a long-term chart going back to the late '80s, and you can see US dollar largely non trending asset except when you put it on a lower time frame. This is a huge move for the US dollar. Can't underscore that enough.

Also want to show you what's happening with the 13 week T-bill yield. Now, this is a two-month chart. I just want to show you this is a 21 basis point move to the upside. What is behind this? I think it has to do with something that happened in Sweden overnight.

Just a few hours ago, they raised their benchmark interest rate by 100 basis points. That's something that people have been speculating the Fed may do. And let me show you something else, the US dollar is up 1% on the news. That is versus the Swedish kronor. What does that tell you is that they didn't raise enough.

So all of this points back to the Fed doubling down on being hawkish. Guess what? Markets have not priced in a lot of this just yet. So we're gonna have to see what happens, Julie, tomorrow afternoon with the presser.

JULIE HYMAN: Are there any hints that you're seeing out in the market that there is gonna be a 100 basis point surprise? Most of the people we've talked to have sort of discounted that.

JARED BLIKRE: I look at the 13 week T-bill yield. This is screaming higher. 21 basis points, that is a huge move. I haven't-- well, we've probably seen it in the recent past but I think it underscores the possibility, at least. Now, is it a likelihood? I don't think so. I think Jay Powell would have leaked that to the press.

JULIE HYMAN: Yeah.

JARED BLIKRE: Maybe the Timiraos article yesterday would have said something about that. But nevertheless, there's still a lot that has not been priced in. That's my big takeaway. And the Fed doesn't want to see the stock market rally tomorrow.