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Going into today’s Fed meeting, there were concerns that the Fed may show increased reticence to cutting rates after stronger-than-expected inflation data for January and February. And that it might signal a shallower easing cycle with their scheduled new Dot Plot (which maps out policymakers' expectations for where interest rates could be headed in the future), as well as provide a more cautionary and hawkish tone.
Today, those concerns were eased substantially; at least for the time being. The Federal Reserve officials maintained their outlook for three 0.25% rate cuts this year, and moved toward slowing the pace of reducing their bond holdings (Quantitative Tightening), suggesting they aren’t alarmed by the recent uptick in inflation.
In his post-meeting press conference, Powell essentially shrugged off January’s and February’s higher-than expected inflation data, saying, “It didn’t change the broader story that price gains were slowing on a sometimes-bumpy road.” Furthermore, it was in most FOMC member’s view that they will achieve confidence that inflation is receding towards their 2% target and “there will be rate cuts.”
Long-term Treasury yields pulled back the Fed announcement, giving a boost to stocks.
The benchmark S&P 500 rallied .89% to close at another all-time new high. Breadth was good with advancing stocks leading declining stocks by 3.5 to 1 on the NYSE and 3 to 1 on the Nasdaq.
The tech-heavy Nasdaq 100, which had recently dipped below its uptrend channel, rallied 1.15%. Its MACD is still in sell mode,however, suggesting subpar momentum — at least this point.
As small-caps have been very rate and yield-sensitive, they outperformed today with the Russell 2000 Index jumping to a 1.9% gain.
While I’m not particularly bullish at these extended levels on the major indexes, the FOMC meeting risk is gone (for now), and the trend remains up. The indexes had been threatening to roll over, in a moderate way, but market bulls got what they wanted/needed to hear today. It remains an environment of picking your spots where stocks are breaking out of constructive bases and there’s good relative strength.
That’s it for now, I’ll write in more detail over the weekend. And as always, I’ll be posting frequent market commentary on WMI’s private Twitter (X) page.
On to a new/updated long & short focus watchlist.
Focus Watchlist
I try to recommend trades that are timely and that a breakout/breakdown is likely to occur soon. If I take a stock or ETF off the focus watchlist, it may be because the trade needs more time to ripen, it ran away from us, or I’m no longer considering it at all.
Longs:
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