/ March 20
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Thursday:
Initial Jobless Claims (224K exp.)
Existing Home Sales (3.92M exp.)
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Friday:
N/A -
Thursday:
Darden Restaurants
FactSet
FedEx
Lennar
Micron
NIKE
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Friday:
NIO
Carnival
Daily Briefing
*The stock market rallied in the mid-week session; there was a positive bias in the early going and buying interest increased following the 2:00 ET FOMC decision and Fed Chair Powell's subsequent press conference;
*Major indices closed near their session highs after the Federal Open Market Committee (FOMC) held rates steady, leaving the federal funds target range unchanged at 4.25-4.50% in a unanimous vote;
*SPY once again reclaimed the technically important $565 price level — though it has to be said that the 200-DMA remains in focus for further rally efforts; currently at $570, it is acting as short term resistance and is limiting buy-the-dip efforts for the time being; on the intra-day charts, we can note two failed attempts to breach the 200-DMA to the upside; recent lows need to hold in order for the market to move higher again, towards 50-DMA resistance ($591);
*The MACD signal will complete a BUY crossover soon, unless further losses occur; since the positive crossover will happen at very low readings, this should give the markets a further boost in the short term;
*We’ll turn our attention to the FOMC meeting once again, since it was yesterday’s key catalyst; the vote was unanimous, but the directive indicates a dissent by Fed Governor Waller;
*Mr. Waller did not disagree with the rate decision; rather, he preferred to continue the current pace of declines in securities holdings; his view did not win out; the Fed decided to reduce the pace of Treasury securities it will allow to runoff its balance sheet from $25 billion per month to $5 billion per month, starting April 1; the runoff for agency mortgage-backed securities was left unchanged at $35 billion per month;
*Notably, the directive indicated that the uncertainty around the economic outlook has increased (in December it said the economic outlook is uncertain), but continued to assert that the Committee is attentive to both sides of its dual mandate;
*The latter statement will be subject to debate given that the Summary of Economic Projections showed a downtick in the median estimate for 2025 real GDP growth from 2.1% to 1.7% and an uptick in the PCE inflation rate from 2.5% to 2.7% (core-PCE was increased from 2.5% to 2.8%); the interesting thing is that the median estimate for the fed funds rate was unchanged from December at 3.9%, which is tantamount to an expectation for two rate cuts;
*The updated SEP suggests a cautious Fed, balancing slower growth and higher unemployment against elevated inflation; the "dot plot" from this meeting shows a narrower range of rate cut expectations for 2025, with most participants clustering around two cuts, tempered by the higher inflation outlook;
*The Central Bank is clearly more concerned with stubborn inflation than slowing growth;
*During his press conference, Fed Chairman Powell again said that there is no rush to adjust policy; he warned that it is "going to be very difficult to have a precise assessment of how much inflation is coming from tariffs."
*He indicated that it's "kind of the base case" that inflationary pressures from tariffs would be transitory, adding that the last time tariffs were imposed, the increase in prices was transitory;
*Mega cap shares led the upside charge in equities, exhibiting rebound activity after leading declines the day before; Tesla (TSLA, +4.68%), Google (GOOG, +2.22%) and NVIDIA (NVDA, +1.8%) stood out by this metric;
*The market has now officially bounced away from “Extreme Fear” readings, as a stabilization in the price action led to a respite in investor sentiment; “Fear” is still prevalent, but it’s not “Extreme” at this juncture;
*A sharp drop in rates also contributed to the upside bias in stocks; the 10-yr yield settled three basis points lower at 4.26% and the 2-yr yield settled six basis points lower at 3.98%;
*TLT is still working its way through the recent consolidation pattern; yesterday’s positive close (+0.52%) achieves a slight breakout, though our opinion is that in a true risk-on equities rally environment we should see a rotation away from bonds in the short term;