What Powell Did and Didn't Say
Can the market now find some support after the lackluster response to the Fed?
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Jerome Powell didn’t say anything particularly dovish or surprising on Wednesday during his press conference, but he produced a very wild swing with a sharp spike higher as he spoke and a complete collapse after he finished.
Initially, the market was very pleased that he didn’t say anything overly hawkish. Powell acknowledged that recent data has shown an uptick in inflation, and he said his confidence in inflation moving back down was lower than before, but he saw no signs of stagflation and thought it unlikely that there would be a hike.
There were no clues as to when a rate cut might occur, and Powell repeated once again that the Fed remained data-dependent and was happy with the strength of the economy and the progress in inflation over the past year.
There wasn’t any clear reason for the total reversal after Powell finished his press conference, but maybe it was just the recognition that nothing really changed. There is still a high likelihood that there will be no rate cut in 2024, and the danger of an economic slowdown still exists.
The post-Fed bounce was quite strong and produced breadth of about 7,000 gainers to 2,300 losers at first, but that fell to 5,000 gainers to 4,200 losers at the close. The S&P 500 and Nasdaq 100 QQQ went green to red, but the DJIA and Russell 2000 managed to squeeze out small gains.
The question now is whether the market can find some support after the lackluster response to the Fed. The first obstacle will be the earnings report from Apple AAPL which is due out Thursday after the close. The market no longer seems to have AI as a primary driver, but Apple has been seeing some support recently.
We have quite a few earnings reports coming up, and then we have the April jobs report on Friday. The market is going to continue to look for economic news that will push the Fed to cut rates, but right now there isn’t anything on the horizon.
Technical conditions are poor, and the reversal today didn’t help. A test of recent lows looks likely in the days ahead.
Have a good evening. I’ll see you Thursday.
