MPC Morning Call 19th February 2026 – Hawkish Fed takes heat out of early rally
Stocks gave up early gains overnight, after the latest Federal Reserve minutes flagged the possibility of future rate hikes to fight inflation.
WATCH ON YOUTUBE \MPC Morning Call 19th February 2026 – Hawkish Fed takes heat out of early rally Stocks gave up early gains overnight, after the latest Federal Reserve minutes flagged the possibility of future rate hikes to fight inflation. Markets had been solidly higher earlier, helped by a rebound in the technology sector. Traders also moved into equities and dumped bonds after strong economic data. Equities eased from early highs on Wednesday after the Federal Reserve’s January meeting minutes revealed that while policymakers largely agreed to pause rate changes, some remained open to future hikes if inflation stays above the 2% target. The Federal Open Market Committee (FOMC) kept the federal funds rate at 3.50%–3.75%, following three consecutive 25 basis point cuts last year. The minutes also noted that after 75 basis points of easing, most members considered the current stance appropriate given solid economic growth and a stabilizing labour market. However, “several” participants favoured a “two‑sided description” of future policy to acknowledge the potential need for renewed rate increases if inflation proves sticky. Economic indicators since the January decision have shown mixed signals, with blockbuster nonfarm payrolls data contrasting with January’s cooling consumer prices. The Fed acknowledged that inflation remains “somewhat elevated,” though activity continues to expand moderately. Some participants expressed that holding rates steady “for some time” would be prudent while monitoring data, and a few even doubted whether further cuts would be necessary without clear progress on disinflation. Traders currently expect the Fed to resume easing with a 25 bp cut in June, according to the CME FedWatch tool. Still, analysts described the minutes as modestly hawkish relative to market expectations — a stance that may complicate policy continuity amid uncertainty over President Trump’s nomination of Kevin Warsh as the next Fed chair and ongoing scrutiny of current chair Jerome Powell’s tenure. Treasury yields climbed as investors reacted to robust January industrial figures, prompting a bond sell‑off. Industrial production rose 0.7% month over month, while manufacturing output increased 0.6% — the strongest gain in nearly a year. The 10‑year yield ticked up to 4.08%, and the 2‑year yield reached 3.46%, signaling resilience in economic fundamentals despite rate uncertainty. Market focus now shifts to Friday’s PCE price index, the Fed’s preferred inflation gauge, for clues on whether disinflation remains intact or further tightening may be reconsidered. In equities, the technology sector led early gains but softened later in the session as Palo Alto Networks’ disappointing profit guidance weighed on sentiment. Despite beating on revenue and earnings, the cybersecurity firm’s outlook sparked a 7.5% decline in its share price, reinforcing caution around high‑valuation tech names amid the AI investment cycle. In commodities, oil prices rebounded after heavy losses, with Brent rising 4.4% to $70.36 per barrel and WTI up 4.6% to $65.08. The recovery followed reports of progress in U.S.–Iran nuclear negotiations, suggesting more Iranian crude could return to global markets — a factor likely to cap further oil price gains in the near term. Commodities, Energy & FX ASX Overnight: SPI 9019 (+0.61%) The Day Ahead: The ASX will be dominated by earnings again today. Corporate news WES earnings – Click here to read WES summary HUB Earnings – Click here to read HUB summary TLS Earnings – Click here to read TLS Summary
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