Stocks fall as Wall Street awaits Fed rate hike decision

March 22, 2023 at 10:03 AM

Yahoo Finance’s Jared Blikre joins the Live show to break down how stocks are moving ahead of the Fed’s FOMC decision on Wednesday.

Video Transcript

BRAD SMITH: I'm taking a look at the major averages. We are down across the board, but we've been kind of flippity flopping, waffling here on this Wednesday. Let's get on over to Jared Blikre back, live in living color at the YFi Interactive.

JARED BLIKRE: Here for the big show today. And while I was gone, not much happening this morning, but let's check out what has happened in my absence. This is over the last five days. I was last here Thursday afternoon. It's been up 3 and 1/2%. That is the NASDAQ. Dow, which has been lagging this year, that is up 2%, but I think investors will take that.

And let me just show you what the sector action is today, and then I'll close on some longer term outlooks here. Now, tech is in the green here, but just barely, 14 basis points. Materials, staples, health care also slightly in the green. Real estate really taking it. That's down over 1%-- almost 1 and 1/2%, followed by utilities there. So a little bit-- some of the defensive sectors in the rear might be what you would expect for this day, but not seeing any huge trends. Nvidia up 1 and 1/2%, Tesla up 1%.

But let me go back to the S&P 500 here, and also take a look at here is a three-month chart. Now, let me just put a one-year. And you can see, over the last year, basically not a whole lot has happened. In fact, that goes back to the beginning of Jay Powell's efforts, all the way towards the end of Q1 last year.

But I want to show something that has developed in the market. This comes via Morgan Stanley. Here's a little note. Five things that happen when the S&P 5-- or excuse me, five things that happen when these five things are happening. So SPX-- that's S&P 500. Forward earnings-- those are declining. That means that expectations of future earnings are going down. Yield curve has been inverted since last year. That's one of the things.

Unemployment below average-- that means that the economy is still primed, yet manufacturing PMI is going below 50. That means that we're seeing cracks in the manufacturing sector, plus 40% of banks tightening lending standards. So all of this points to the situation where we are now, that we still have a robust economy that is on the precipice of cracking. And when all of those five things are in effect, we usually-- six months out, we usually have a decline of 4 and 1/2% in equities prices. So just something to consider there, guys.