Equities are slightly positive as we approach noon on the East Coast. At 2 PM, Fed Chair Warsh and the FOMC will announce its latest policy decision on rates. Market pricing for odds of a hike are currently above 90%. While the Fed hasn't indicated it will definitely hike rates, the market seems to think it will.
There are two countering market trends that will battle it out this afternoon.
The S&P got pummeled on Warsh's first two Fed days in June and July. On 6/17, Warsh's first meeting as Chair, the S&P fell 1.2%, and then it fell even more on Warsh's second Fed day on 7/29 with a drop of 1.5%. As you can see in the first chart below, all of those declines came in the last hour of the trading day after Warsh spoke to reporters.
While the market has done nothing but trade lower on Warsh Fed days so far, it has actually traded higher on prior Fed days where we saw the first rate hike of a new tightening cycle.
The second chart below shows the S&P's average intraday path on the six Fed days since 1994 when a new hiking cycle began. As shown, the index tends to drift lower up until the 2 PM ET rate decision, then ultimately rally in the final two hours of the trading day.
Heading into today's FOMC decision, the trend of market declines on Warsh Fed days will battle the trend of market gains on the first rate hike of a cycle. Which side are you taking?
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