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A guide to today’s Federal Reserve rate decision, regional banks tumble and bonds are in favor over stocks. — Liza Tetley Fed decision day h [View in browser]( [Bloomberg]( A guide to today’s Federal Reserve rate decision, regional banks tumble and bonds are in favor over stocks. — [Liza Tetley]( Fed guide [Fed decision day has arrived and the market is expecting a 25-basis-point hike today](, in what many expect to be the last interest-rate increase for a while. Persistent financial market turmoil, following the collapse and buyout of First Republic Bank earlier this week, has ramped-up bets that this hike will be followed by a pause, as tighter lending conditions and signs that the economy is stalling suggest inflation will cool more meaningfully in the coming months. Fed Chair Jerome Powell is likely to also echo previous messages calling for the US debt ceiling to be raised. Regional banks The dust may be starting to settle on First Republic Bank’s troubles, but [a tumble in US regional lenders has sparked renewed anxiety over financial stability](. Multiple volatility halts were seen on PacWest and Western Alliance Bancorp, and financials were down across the board on Tuesday as traders were spooked by doubts over regional banks, recession risks and a potential US debt default. Former Federal Reserve Bank of Dallas President [Robert Kaplan has added to the unease, saying the US regional banking crisis is far from over]( and calling for the Fed to pause rate hikes. Strategy shift Fund managers and strategists from [Morgan Stanley to JPMorgan to UBS are preferring bonds to stocks](, saying they will be more resilient to the potential economic slowdown, while equities will be exposed if the Fed fails to deliver a soft landing. Investing in bonds is also becoming more lucrative too, with the gap between the yields of high-grade dollar bonds and dividend yields of companies widening by almost 90 basis points in the past year. “Stock investors have to cope with the fact that multiples may contract at the same time that earnings begin to fall,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. Markets bounce US equities are set to open higher today, with contracts on the tech-heavy Nasdaq up around 0.2% while the S&P 500 rises 0.1% as of 5:45 a.m. in New York, bouncing from yesterday’s losses ahead of the Fed decision. Treasury yields are lower, as traders seek out havens, while a measure of the dollar is weakening as traders eye recession risks alongside a potential pause in interest rate hikes. Oil futures have slumped to around $70 a barrel on demand worries as the global economy slows. Meanwhile, most metals, including gold, decline slightly. Coming up… We have MBA mortgage application data coming at 7:00 a.m. followed by ADP employment change at 8.15 a.m. After that, there are PMIs at 9:45 a.m. and ISM services data at 10:00 a.m. The big moment will be the Federal Reserve rate decision at 2:00 p.m. followed by Powell’s press conference at 2:30 p.m. On the earnings front, Qualcomm, CVS, Estée Lauder, Kraft Heinz, Metlife, Emerson, Corteva, Exelon, Yum! Brands, Mosaic, Noble, Bunge, Etsy, Zillow, WWE, Phillips 66, Oak Street Health, Marathon Oil, Horizon Therapeutics and HubSpot are reporting. What we’ve been reading Here’s what caught our eye over the past 24 hours: - [Oil prices plunge, dipping below $70 a barrel]( on demand fears - The [EU wants more scrutiny on commodity traders]( after Russian war exposed risks - [Microsoft chief economist warns of the dangers of AI]( in the wrong hands - Jobs and wages are booming for [bankers in Saudi Arabia]( - Illegal [drugs found during autopsy of stabbed Silicon Valley executive,]( Bob Lee - [British lender Lloyds Banking’s earnings add to sense that UK](has weathered economic storm - New York Times’s Erin Griffiths trials [wellness and emotional support chatbot, PiÂ](bbg://news/stories/RU2T9TTVI5MO) And finally, here’s what Joe’s interested in this morning Good morning and Happy Fed Day. The widespread expectation is that FOMC hikes rates by another 25 basis points today. After today is when the forecasts start to get more ambiguous, with some predicting that this will mark the end of the hiking cycle or that at least there will be some kind of pause after this. Obviously it's impossible to know, but there are some clear risks out there. The regional bank mess does not look over, at least judging by what the stock market is doing to some of these shares. It's TBD what this means for financial stability and credit availability, but presumably it's not good. Meanwhile, oil keeps plunging, which is at least a yellow light. Manufacturing surveys have all generally been ugly. On the other hand, just to be clear, it's definitely not all gloom. Again, housing seems very robust. Earnings season has been good. By and large, big consumer facing companies do not seem to be seeing much weakness. Here were some headlines from hotel chain Marriott yesterday: *MARRIOTT INTL RAISES FULL YEAR OUTLOOK *MARRIOTT INTL: NOT SEEING SIGNS OF A SLOWDOWN *MARRIOTT INTL 1Q WORLDWIDE REVPAR EX-FX $116.45, EST. $115.52 All that out of the way, yesterday we got the latest JOLTS report for March, and the data clearly shows a labor market that's coming off the boil. Here's the Quit Rate and total Job Openings, the two main measures from the report: This is one of those things where the levels are still fine (both better than they were pre-pandemic) but also where the direction is towards a clear loosening of the labor market. Total job postings are coming down and by and large, people are quitting their jobs at a lower rate than they were a year or even 6 months ago. Back in March, Senator Elizabeth Warren took a lot of heat for [what I thought]( was a very legitimate line of questioning ([YouTube clip here]() to Chair Powell. I'm paraphrasing it, but the basic gist was: "Once the layoffs start gathering steam, why do you think they will be modest, and not spiral out of control?" As she rightly pointed out, history is not kind on this front. There are very few examples, if any, of modest increases in the unemployment rate. Modest increases have a history of becoming substantial increases. Weakness in labor leads to weakness in spending, which leads to weakness in labor, for reasons that are highly intuitive. So going back to today. There is some negative momentum in the labor market, at least in the first or second derivative. Initial Jobless Claims have been picking up as well. We know there are those other clouds out there. So it will be interesting to hear from Powell about risk management. Inflation is definitely too high. That is front and center and that is why the overwhelming number of economists surveyed by Bloomberg are expecting a rate hike. But how is the Fed thinking about the risks that those clouds lead to a real storm? And at what point do those risks start to become front and center again is a key question for today. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](