Market Storylines: Iran Deal, Kevin Warsh's First Fed Decision + Tech Rebound

**Michael Reinking** (0:00)
Hello, I'm Michael Reinking, Senior Market Strategist at the New York Stock Exchange, and this is Market Storylines. Now, every week, we're here to keep you up to date on the key trends and events driving global markets, and of course, this epic New York Knicks playoff run. Now, we're recording on Thursday, June 18th, shortly after the Knicks Parade passed Broad and Wall. So let's dive in. Now, today has been a day 50 plus years in the making. The amazing and literally one-of-a-kind Knicks Championship run has brought the city together, culminating with today's celebration. Now, since this isn't a sports podcast, I'll try to bring it back to markets, but have no fear there will be Knicks references throughout. Now, last week, as Eric highlighted, markets bounced back modestly after the nine-week winning streak was broken in the prior week. Now, it appeared there were some positive developments on the Iran front, with President Trump calling off planned strikes and saying that a framework for an agreement had been reached just before Eric took to the airwaves last Thursday. Now, that helped markets rally during the final two days of the week as oil prices fell sharply for the third week in the last four, helping to push treasury yields lower. Now, this, along with some selling in tech to make room for some of the recent issuance, including Friday's SpaceX IPO, helped to drive some rotational activity out of tech and into other cyclical areas and pockets of the market that have underperformed. Now, the S&P 500 ended the week up a little over half a percent, while the equal weight version of the index and small and mid cap indices were up between two to four percent. Now, financials, consumer staples, and materials were the best performing sectors.
Now, on Saturday night, the come back kid NICs capped off their championship run, overcoming yet another double digit deficit. Now, Sunday was President Trump's 80th birthday, which he celebrated watching the UFC on the White House lawn after announcing an Iran deal had been finalized. Now, it was his birthday, but he was in a giving mood, as this was probably the biggest gift he could give to his newly appointed Fed Chair Kevin Warsh ahead of his first policy meeting. Now, on Monday, oil prices continued to move lower, with ICE Brent trading into the low 80s, breaking below the 100-day moving average and testing the mid-May lows. Now, equities continue to move higher, with tech leading to the upside. Now, the S&P 500 closed just under 7600, up nearly 2% on the day, and markets spent the next day and a half consolidating those gains ahead of this week's main catalyst, yesterday's FOMC rate decision.
Now, Jalen Brunson isn't the only new sheriff in town. In a bloodless transfer of power, Kevin Warsh assumed the Fed chair role from Jerome Powell, and quickly put his stamp on things. A unanimous vote by the FOMC left the target rate unchanged to 3.5% to 3.75%. Now the statement was shortened dramatically, 130 words from 237 for those counting, and removed the easing bias as expected, but it notably, it ended with a resounding sentence, the committee will deliver price stability.
Now the summary of economic projections, which didn't include projections from the chair, also evolved in a hawkish manner, signaling a hike this year with nine of 18 members expecting at least one and six of those projecting two.
Now the press conference had a very different tone as well.
During his prepared remarks, the chairman talked about the open-mindedness and thoughtful dialogue with members of the committee to move the Fed forward. Now taking the eraser to the statement and the removal of forward guidance were the lead in, and the sheriff made it clear more changes are coming. To that end, Chair Warsh announced the creation of five task forces that will take a fresh look at things and make recommendations by the end of the year for changes in the following areas. Communications, the Fed's balance sheet, the use and reliance on existing and new data sources, productivity and jobs in an era of transformation and the inflation framework.
Now, throughout the press conference, the chair was steadfast about delivering price stability, saying we've missed the inflation goal for five years, we're going to fix it. Now, when discussing the task force and the inflation frameworks, he highlighted that the 2% target is outside of the scope of the task force, and it will not be revisited until it is attained. Now, forward guidance was omitted from the statement, and he made it clear that would be the case during the press conference as well, highlighting that market pricing is an important signal, and that was being diluted by the previous communication regime. And when pressed about how he was thinking about the future of policy, he repeatedly said, we have a task force for that.