All Eyes on the June FOMC

Federal Reserve Chairman Jerome Powell

Stocks gained slightly this morning as the S&P climbed by roughly 0.3%, getting close to its highest point in nine months. The Dow Jones stayed almost the same, losing only 8 points while the Nasdaq Composite enjoyed a 0.5% return.

Apple’s (NASDAQ: AAPL) shares continued to fall after CEO Tim Cook showed off his new “mixed reality” headset – the Apple Vision Pro – yesterday afternoon at the company’s big yearly meeting. Before this, AAPL hit a new all-time high.

The Vision Pro, though very impressive on a technical level, left conference attendees wondering how practical it would be to actually use the device. Tech product bloggers were given hands-on access to the Vision Pro and came to similar conclusions. The product’s biggest hurdle is its price tag at a whopping $3,500, which could make the Vision Pro prohibitively expensive as the US enters a recession. Apple expects to launch the Vision Pro next year.

The market’s narrow breadth means that wherever Apple goes, the S&P probably will, too. A protracted Apple selloff could easily pull the S&P into a correction with the index looking so overbought.

Coinbase (NASDAQ: COIN) shares also plummeted today on news that the SEC is filing suit against the popular US-based crypto exchange. The lawsuit comes just one day after the SEC announced that it was going after rival exchange Binance. Bitcoin cratered yesterday in response but has rebounded slightly as of this morning.

“These trading platforms, they call themselves exchanges, are commingling a number of functions,” SEC chair Gary Gensler said. “We don’t see the New York Stock Exchange operating a hedge fund.”

Gensler says the exchanges are operating as unregistered brokers. He pointed to Coinbase’s staking program, in particular, accusing the exchange of defying for years “the regulatory structures” and “disclosure requirements” requested by the SEC.

Following 2021’s crypto boom, Bitcoin has retreated to being far more niche; continued regulation won’t impact the broader equity market.

But the SEC’s conquest stole headlines today in what was an otherwise sleepy trading session. Looking forward, stocks might stay “stuck” at their current level in anticipation of the June FOMC meeting and a potential rate hike.

“It really seems like we’re kind of in a holding pattern. With the Fed next week, people are kind of taking a breath,” said KKM Financial CEO Jeff Kilburg.

The next Fed meeting wraps up on June 14th, and according to the CME Group’s FedWatch Tool, rate hike odds are falling. Down from 27% last week, Treasurys are now pricing in a 20% chance of a 25 basis point rate increase this month.

Because of this, a rate hike would likely be ruinous to growth stocks that enjoyed a major melt-up over the last few weeks. That means stocks are likely on a collision course with yet another “make or break” FOMC. Given how sharply bullish market participants are, however, a correction – even a short-lived one – seems probable at this point if bulls decide it’s finally time to take profits.


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