Fed fund futures found buyers on the dip and since early Tuesday have restored about 9 basis points to total easing expected by December.
The chance of a cut as early as May stands somewhere between 65% and 80% depending on what calculation method is used. As an aside, it would be really helpful for probability fans if the Fed returned to setting a single funds rate target and not a range like the current 5.25-5.50%.
The middle of that range is 5.375%, but futures contracts are priced off the effective funds rate which is trading at 5.31/33%. It makes calculating probabilities a headache.
Anyway, futures imply around 123 basis points of easing for all of 2024, compared with 145 basis points late last week.
As for corporate results, of S&P 500 companies that have reported so far, 81% have beaten the Street and earnings look like being up 8% on the same quarter a year ago.
Companies reporting earnings on Wednesday include Uber, News Corp, PayPal and Walt Disney. Expectations for Disney are for flat revenue and a dip in earnings, but the stock still bounced 2.7% overnight.
The banking sector remains a concern after Moody’s downgraded New York Community Bancorp to junk, citing pressure on its funding and liquidity. The stock sank 22% on Tuesday and is down 60% since it reported a loss last week.
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