Chip Somodevilla/Getty Images News
Chip Somodevilla/Getty Images News
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The FOMC kept its dot-plot steady despite higher growth and inflation forecasts. (0:15) The S&P 500 closes above 5,200 as yields fell. (0:27) Money manager risk appetite at 2-year high. (4:55)
The following is an abridged transcript:
The Federal Reserve gave the markets almost nothing new with its decision today – no move on rates, virtually no change in the statement, no shift in the dot plot projecting three rate cuts in 2024 and no change in tone from Chairman Jerome Powell.
And that was just fine with stock and bond bulls.
Stocks rallied sharply, gaining steam from the release through Powell’s press conference. The S&P (SP500) (NYSEARCA:SPY) set a new record high above 5,200. The Nasdaq (COMP.IND) rose more than 1%.
Stephanie Link, chief investment strategist at Hightower Advisors, says a soft landing and a benign Fed are positive for earnings and stocks. But more importantly, the broadening in sectors continues.
Treasury yields fell with more pressure on the short end. The 2-year (US2Y) is back close to 4.6% and the 10-year (US10Y) yield is below 4.3%. Gold (XAUUSD:CUR) rose more than +1%, while the greenback (DXY) gave up earlier gains.
For the record the Fed kept rates in the range of 5.25%-5.50%.
With the actual decision a foregone conclusion, the focus was on the Summary of Economic Projections or the dot plot. And it looks like the recent round of hot inflation data hasn’t prompted a knee-jerk hawkish reaction from the FOMC.
The dot plot still shows three quarter-point rate cuts in 2024, although one fewer in 2025. But the fact that the median dot stayed steady for this year despite anticipation of hotter growth and inflation indicates Fed members are still comfortable with the path they’re on.
The Fed boosted its Real GDP growth forecast to 2.1% this year, up from a previous forecast of 1.4%, Core PCE inflation is seen up 2.6% vs. the previous estimate of 2.4% and the unemployment rate is forecast to be 4%, down a touch from the 4.1% expected in the last SEP.
Renaissance Macro says: “While the median barely held on at three cuts (in 2024), at the end of the day, GDP was revised up, core inflation was revised up … and the median dot was unchanged. That's dovish.”
Powell kept to a dovish script as well during his press conference and did little to disrupt the risk-on tone of the markets.
Powell said while January and February inflation data didn’t boost confidence on the inflation front, “We don't really know if this is a bump on the road or something more. We'll to have to find out. Here are some bumps. Are they more than bumps?”
So, wait and see for the Fed chief.
Jospeh Brusuelas, economist at RSM, says as Powell wrapped up his presser the market was pricing in a near-70% probability of the first rates cut coming in June. and three rate cuts this year: June, September and December.
“This has been our … policy forecast and we expect this to be part of a broader set of near-synchronized 2H'24 rate cuts by the global central banks.”
Among active stocks
JPMorgan Chase (JPM) boosted its quarterly dividend to $1.15 per share, up 9.5% from the prior dividend of $1.05. The forward yield is 2.37%, the ex-dividend date is April 4 and the payout is April 30.
Boeing CFO Brian West says the company has decided to keep production of its best-selling 737 Max jetliner at fewer than 38 a month.
The company's cash burn during the first quarter will be between $4 billion and $4.5 billion, which is higher than the company had estimated in January. The negative cash flow is the result of fewer aircraft deliveries and pressure on working capital, West said, adding, “For years, we prioritized the movement of the airplane through the factory over getting it done right, and that's got to change."
Chinese e-commerce company PDD (PDD) rallied after non-GAAP earnings per American depositary shares rose about 35% year over year to RMB17.32 ($2.40). Revenue soared nearly 123% from the year-ago period to RMB88.88 billion (about $12.52 billon). Both top and bottom lines topped estimates.
In other news of note
Let’s hit the links.
Topgolf Callaway Brands (MODG) shot higher after South Korean newspaper The Chosun Daily reported that the golf equipment company could be up for sale. No other major media source has confirmed the report yet.
Major shareholders BlackRock Advisors LLC , Providence Equity Partners LLC, and Thomas Dundon were said to have selected a lead manager and be in the process of selling their stakes and management rights. The plan as reported is for the company to spin off the Topgolf entertainment business and sell the Callaway Golf equipment and apparel business for about $2.98B.
TruGolf Holdings (TRUG) soared after it announced an agreement with mlSpatial to license the AI engine they co-developed to increase 9-axis spin accuracy for TruGolf’s new APOGEE launch monitor.
The company said that the agreement gives TruGolf the first right of refusal to purchase 100% of mlSpatial assets.
And in the Wall Street Research Corner
The March BofA Fund Managers Survey is out. Analysts took the pulse of the market, getting input from 226 money managers with $526 billion in assets under management.
Risk appetite rose to its highest level since November 2021, while stock allocation hit a two-year high. Global growth expectations are also at a two-year high.
When asked if the market was currently seeing an AI bubble, 45% said no and 40% said yes.
Long Magnificent 7 retained the top spot as most crowded trade. That's followed by short China equities (FXI) (MCHI), long Japan equities (EWJ), long bitcoin (BTC-USD), long cash (VMFXX) and long investment grade corporate bonds (LQD).
Higher inflation is still considered the biggest tail risk. Geopolitics is in the No. 2 spot, followed by a hard landing and then the U.S. presidential election.
Strategist Michael Hartnett says contrarian trades would be long tech against the bubble, long UK stocks (EWU), commodities and resources against stagflation and long staples (XLP) and utilities (XLU) against a hard landing.