The Fed wasn’t kidding around when they talked about being more patient earlier this year. The Committee backed it up today by saying that 2019 might not see any rate hikes at all!
That’s a great deal more dovish than the previous expectation for two hikes this year. And, of course, they left interest rates unchanged as was universally expected. What a reason to rally!
The only problem was that the market didn’t rally. The knee-jerk reaction was sharply higher, but then the major indices cooled off and declined into the close. Unsurprisingly, the financials led the way lower.
The Dow recovered from a 160-point drop after the Fed news, but then it turned lower again and finished the day just about 20 points off of its low. It dropped 0.55% (or about 142 points) to 25,745.67. Meanwhile, the S&P slipped 0.29% to 2824.23.
The NASDAQ continued to outperform its counterparts and was the only index that stayed in the green… though just barely. It was up 0.07% to 7728.97. The FAANGs had a strong session with Netflix (NASDAQ:NFLX) gaining 4.6%, while Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) were each up more than 2%. Tech stocks remain one of the market’s hottest areas.
However, the Fed news did help the market recover from more trade drama. On Wednesday, President Trump stated that tariffs on China may stay in place for a “substantial” period of time… perhaps even after a deal is signed. Needless to say, that’s not what the market wanted to hear and it began moving lower even before the Fed’s policy decision.
Of course, it’s just another headline… and the market will remain at the mercy of such headlines until we get a real trade deal. Fortunately, Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer are heading back to China next week for more talks, so hope springs eternal that we are getting closer and closer to a breakthrough.
Today's Portfolio Highlights:
Home Run Investor: There are no rules against this portfolio picking up a low-priced stock. Case in point, Brian Bolan added Synchronoss Technologies (SNCR) on Wednesday, a Zacks Rank #2 (Buy) provider of essential mobile solutions. The stock slipped to around $6 from $8 after a “noisy” quarter last week that the market didn’t appreciate. But the editor liked SNCR’s guidance and considers this to be an “excellent buying opportunity”. Read the complete commentary for a lot more on this new addition.
Counterstrike: "The Fed did it again as the FOMC announcement to not raise rates in 2019 caused a surge in stocks. This was a surprise to the markets as it was expected that the fed would hike at least once. The S&P was red and turned green after the announcement, but sold off into the close.
"This fundamental shift in policy trumped some of the negative China trade headlines we had seen in recent days. This caught traders off guard as gold surged and the dollar tanked. Perhaps what was strange was the sell off late in the day, back down to pre-Fed levels. This is suspicious as the news is overwhelming good for most stocks.
"The financials didn’t like it, down over 2% on the day. The theory is if interest rates aren’t going up, banks make less money. While financials were a major drag on the S&P, the tech heavy Nasdaq was up nicely, with stocks like Netflix, Amazon and Facebook leading the way.
"With the Fed turning very Dovish, they are no longer a risk to the market. So, the catalyst we need to head higher is the trade deal to finally come to an end." -- Jeremy Mullin
Insider Trader: "Today's Fed announcement was somewhat dramatic in terms of them totally capitulating and admitting that there won't be any rate hikes this year, barring any change in the data, of course.
"After raising aggressively last year, to suddenly see them come to a complete halt is jarring.
"But I've always said that the Fed never gets the timing right. They are always too late to respond to economic changes and to change course.
"This will probably be the year when inflation actually DOES rear its head, just as the Fed remains on the sidelines.
"Stocks fell on the news but it really does boost the bullish case. They want the Fed to keep money cheap. That's what is happening. The Street should be happy that their tantrum in November and December last year actually worked." -- Tracey Ryniec
All the Best,
Jim Giaquinto
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