US equity futures point to a flattish to slightly lower open as we await the Fed's monetary policy decision due at 2 pm ET.

As we discussed in yesterday's Daily Rundown, with measures to shore up the US banking system over the last few days, we've seen expectations shift back to the Fed boosting the fed funds rate by 25-basis points later today and again at its May meeting. However, the CME FedWatch Tool still sees 25-basis point rate cuts following the Fed's July, September, and December policy meetings.

That expectation comes despite the upward trajectory in sequential core Consumer Price Index data over the last few months, sticky service sector Producer Price Index data, and the Atlanta Fed's GDPNow model estimating real GDP growth of 3.2% for the current quarter.

Should the Fed reiterate it will stay the course to fight inflation either in its policy statement or in comments by Fed Chair Powell during the subsequent press conference, signaling it still plans on holding interest rates at elevated levels until inflation returns to its target level, this would disrupt the scenario depicted in the CME FedWatch Tool. Should that come to pass, and we think the odds of it happening are rather high, it would foster another re-think as to what lies ahead for interest rates, the economy, and earnings.

As we discussed yesterday, this has happened more than a few times over the last year, and it has tended to be a bitter pill for the market to swallow. That is why we continue to hold the portfolio's inverse ETF positions and why we've been extremely selective in our portfolio moves of late even though a few positions are at or near compelling levels.

Alongside the Fed's policy statement, it will release its latest economic projections. We of course will be comparing and contrasting them to the prior forecast released in mid-December that forecasted 2023 GDP of 0.5%, a 4.6% Unemployment Rate for the year, and core PCE inflation of 3.5%. Revised expectations will be fodder for Fed Chair Powell's press conference, and we will no doubt see the Q&A portion attempt to pin Powell down as to what the terminal level for the fed funds rate may be.


With scant earnings reports out this morning and no fresh economic data to be had, more than likely the market will be treading water even as it absorbs last night's quarterly results from Nike (NKE) . While the company reported better-than-expected February quarter top and bottom-line results, it also said it expects wholesale revenue growth to moderate for the next few quarters.

Nike also indicated its fiscal 2023 gross margin will decline approximately 250 basis points, coming in at the low end of its prior guidance. Exiting the February quarter, Nike's inventories were $8.9 billion, up 16% YoY, primarily driven by higher product input costs and elevated freight costs.


Adding to efforts to shore up the banking industry, UBS (UBS) announced that it would buy back $2.96 billion of debt issued less than a week ago to boost confidence among investors shaken by the ongoing financial turmoil and its $3 billion interaction with Credit Suisse (CS) . This and other efforts, including comments yesterday by Treasury Secretary Yellen, likely mean the worst of the recent banking failures are behind us, and that is leading us to re-think the downside risk associated with the portfolio's position in Bank of America (BAC) shares as well as our current Two rating. However, as we indicated previously, we are on the bench until we have the Fed and Powell's comments in hand.

We would also add we are mindful when it comes to the current ratings on a few other positions in the portfolio, including Deere (DE) shares and Marvell (MRVL) .

And sticking with Marvell, this morning the company announced it has joined the club of companies announcing layoffs that includes Intel (INTC) , Micron (MU) , Amazon (AMZN) , Meta Platforms (META) , and Alphabet (GOOGL) . The wireless, data processing, and storage chip company will cut ~320 jobs, roughly 4% of its workforce and the market is likely to embrace that action much the way it has with other companies. The thinking is trimming the fat to become a leaner, more focused company will help drive margin improvement in the coming quarters. We're not inclined to disagree.

Our next known catalyst for MRVL shares will be quarterly earnings next week from Micron.