More Fed Presidents Support March Rate Hike

Following the first down day on the Dow in the past 13 sessions, pre-market futures are up in the triple digits this morning. An eye-popping +171 on the blue-chip index joins a +17.5 points on the S&P 500, and +33 points on the Nasdaq ahead of the opening bell. Much of this can be attributed to the sigh of relief market participants breathed as they watched President Trump address Congress for the first time in a manner that was… presidential.

“The time for trivial fights is over,” Trump told Senators and House Reps in a prime-time address last night. This, from a man who routinely hits his Twitter feed with criticisms about the latest skit on Saturday Night Live. Apparently, the market appreciates this new look from the President, with his hopeful vision that economic growth will offset any upfront costs serving to pay for his grand plans for the country.

Further, Trump took the opportunity to denounce acts of racist violence and intimidation that have popped up at this early stage in his presidency. “While we may be a nation divided on policies, we are a country that stands united in condemning hate and evil,” the President said. Along with a proposal of $54 billion to be added to the Defense budget, echoes of Ronald Reagan’s “Morning in America” message managed to be reached, arguably for the first time since Trump’s inauguration nearly 6 weeks ago.

Of course, speeches to Congress aren’t designed to discuss finely tuned elements of policy, and there remain plenty of questions related to border tax policy, national debt, and other things. But Trump’s professional tone has clearly done the trick for the stock market this morning.

Fed Presidents in Favor of a Hike

More Fed presidents have publicly asserted their opinion that there is wisdom to a March rate hike, including Dudley, Williams, Kaplan and Harker. This is, of course, not quite the same thing as actually hiking rates or indicating the Federal Reserve will definitely raise them, but the likelihood of a March rate hike has increased from single-digits little more than a week ago to about 38% now.

Personal Income & Spending

Also, the PCE Price Index was released during today’s pre-market. Personal income rose slightly more than expected (+0.4% compared to +0.3% in last read and 0.3% anticipated), whereas spending rose 0.2%. Last time around (in the report for December), spending went up half a full percentage point.

This is another strong sign for the Fed that a rate hike may be plausible. There is still 2 weeks before the next FOMC meeting, but data dependency being what it is for the Fed presidents, more positive moves both in the market and beyond look to have its place at the table when the group joins again.