Powell Doesn't Upset the Rally Cart
There was some concern on Thursday morning that Jerome Powell might say something a little hawkish during the Fed Chair's press conference and interfere with the powerful post-election rally. However, he stuck with the program and maintained a pleasant tone that didn’t offend anyone.
The Fed cut rates a quarter-point as widely expected, but the most important news is that it isn’t concerned about weak bonds. Powell is more concerned about economic slowing than inflationary pressures and said that if the economy stays hot, the most likely course of action will be to delay rate cuts a bit. The tone of his comments was quite dovish, and Powell said again that the Fed would be data-dependent and would react as the data changed.
The market was satisfied that the Fed wasn’t going to do anything soon to disrupt the bull market and moved slightly higher after the Powell press conference ended. At the end of the day, the S&P 500 gained 0.8%, the Nasdaq 100 (QQQ) was up 1.6%, and small-caps (IWM) lagged with a decline of 0.2%. Breadth was just OK, with breadth not quite reaching two to one positive.
It has been a very powerful two-day move, and with the Fed now out of the way, there isn’t any immediate news on the horizon to slow things down. There are no big earnings or economic news until next week.
The question now is whether this strong momentum can continue or whether stocks need a rest and some consolidation. As I often write, strong markets tend to stay sticky to the upside. The folks who missed out and are underinvested don’t like to chase strength, but they will buy dips and pullbacks aggressively.
I am working hard to identify more names I want to buy on some consolidation. I do not see any immediate threat to this market's uptrend and am going to try to ride the price action as long as possible.
At the time of publication, Rev Shark had no positions in any securities mentioned.