The Fed has a new favorite word, “disinflation”, meaning prices are rising at a slower pace. This implies a soft landing might be achievable. The more times Chair Jerome Powell repeated this word, the more bullish stocks became; and Powell used the word more than 10 times. About 20 minutes into yesterday’s press conference, Powell said, “We can now say, for the first time, that the disinflationary process has started. We can see that.”
The tech heavy, rate sensitive Nasdaq closed up 2% for the day.
The Fed has increased rates 4.5% and the Fed funds rate is now the highest since October 2007. Wording in the Fed statement suggested that the Fed may be near the end of their most aggressive tightening cycle in 40 years. The 10-year note yields tumbled 10 basis points and the US dollar moved down about 0.1%. CME’s FedWatch gives an 85.6% chance of a 25-basis point rate hike after the Fed March meeting.
With Fed risk neutralized for the moment, market focus will return to corporate earnings. Heavy weights Amazon (AMZN), Apple (APPL), and Alphabet (GOOGL) all report after the closing bell.
But first, the European Central Bank (ECB) will release their policy statement @ 8:15am ET, followed by a press conference @ 8:45am ET. A more aggressive stance than the Fed could put a damper on the stock market bulls. ECB President Christine Lagarde will provide a more intimate take on the ECB’s actions in a podcast starting @ 10:15am ET.
Facebook parent Meta Platforms (META) is up nearly 19% premarket after posting weaker than expected earnings caused primarily by a $4.2 billion charge for layoffs and office closures. Meta’s posted $32.17 billion in revenue of which about 97% came from advertising revenue. The company announced a $40 billion stock buyback and CEO Mark Zuckerberg expects to lower costs between $89 billion and $95 billion.
Corporate earnings of Thursday include Apple (AAPL), Alibaba Group (BABA), Alphabet (GOOGL), Amazon.com (AMZN), Bristol-Myers Squibb (BMY), Canada Goose (GOOS), Cardinal Health (CAH), ConocoPhillips (COP), Eli Lilly (LLY), Estee Lauder (EL), Ferrari (RACE), Ford Motor (F), Gilead Sciences (GILD), GoPro (GPRO), Harley-Davidson (HOG), Hershey Foods (HSY), Honeywell (HON), Merck (MRK), MicroStrategy (MSTR), News Corp. (NWSA), Qualcomm (QCOM), Quest Diagnostics (DGX), Sirius XM (SIRI), Skechers (SKX), Starbucks (SBUX), Under Armour (UAA), and World Wrestling Entertainment (WWE).
The economic calendar includes Unemployment Claims, Non-Farm Productivity & Labor Unit Costs @ 8:30am ET, and Factory Orders @ 10:00am ET.
Volatility ticked up in Wednesday’s Fed fueled rally. It will now likely decrease if the bulls try to push higher.
No Whale bias as large trader activity during Globex was mixed.