Stocks, which were lower prior to the 2:00 pm ET announcement, slipped, rallied, then fell into a midpoint between the lows of the day and the highs reached during Powell's press conference (which were still negative, though less so).
Confused? Confounded?
The market was absolutely non-committal, vacillating every which way on Powell's every lip movement, ultimately deciding nothing. For his part, Powell refrained from commenting on anything proffered by President Trump, who expressed a desire for lower rates. The Chairman repeatedly declined to comment on questions that were concerned with the Trump administration and was less-than-forthcoming in regard to the Fed's overall direction for rates.
By the end of the session, markets had reached no consensus, leaving traders to make their own determinations on stocks based entirely their own intuitions or preferences. In many ways, the FOMC policy rate presentation and the Chairman's press conference was refreshing, in that they influenced nothing in particular, somewhat the way things used to be before stocks would rise and fall on any indications from the Fed.
Looking ahead, expect FOMC rate policy announcements to be less consequential, a condition that should be palatable to the majority of market participants. Over the past 20 years or so, markets have been overly sensitive to Federal Reserve policies and often unjustifiablly so. A new paradigm, thanks to President Trump and Chairman Powell each making their own decisions without consultation with each other, is emerging, one that will ultimately result in markets that might return to fundamental analysis of individual stocks rather than the passive, macro-dependent paradigm that's been stock in trade since the days of Alan Greenspan and his "irrational exuberance" pronouncement.
With any luck, market participants will begin making stock recommendations based on price/earnings, year-over-year comparisons, and the wisdom of chartists as opposed to stock buybacks, quantitative easing, and interlocution by the Federal Reserve.
Chairman Powell seemed completely at ease in his new role as an innocent bystander, another good sign for markets in general. Who knows? Some day soon, actual price discovery mechanisms might become normative again.
On that joyous note, earnings from Tesla (TSLA), Meta Platforms (META), Lam Research (LRCX), Microsoft (MSFT) were released late Wednesday, followed by those of Caterpillar (CAT), Dow (DOW), MasterCard (MA), Comcast (CMCSA), Nokia (NOK), Southwest Airlines (LUV), UPS (UPS).
It was a mixed bag, with Microsoft taking some heat for failing to meet or substantially exceed expectations in certain areas, particularly concerning AI and cloud metrics, shares dropping by more than four percent prior to the open. Tesla reported a drop in profit, yet the stock is higher pre-market.
Briefly, Lam Research (LRCX) topped earnings and revenue projections, sending share up by more than eight percent initially. Caterpillar (CAT) beat and warned, sending shares down five percent. Dow (DOW) missed, stock losing more than two percent. MasterCard (MA) reported strong earnings, ahead of expectations and is up a little more than one percent, though the stock is richly valued with a P/E over 40. Comcast (CMCSA) beat, but investors aren't happy with Peacock subscription growth, sending shares down seven percent.
Southwest Airlines (LUV) missed on top line, covered bottom line, losing about one percent pre-market. UPS (UPS) failed to deliver, blames Amazon, investors are shredding it, down 15% before the bell. Ouch!
Gold reached a new high earlier in the morning, topping just above $2,804 per ounce. Silver is up nearly three percent, hitting $32.25. Crude oil's slide continues, WTI quoted as low as $72.08 Thursday morning.
Fourth quarter 2024 GDP came in at a lower-than-expected 2.3%, as reported by the Census Bureau. Stock futures, however, remain positive, which, translated, it's going to get ugly, and soon.
Nothing shocking about these developments other than the markets actually beginning to behave like actual markets.
Overall, whether stocks move up, down, or sideways, this new sense of being alone in the wilderness without the guiding hand of the Federal Reserve is generally refreshing.
At the Close, Wednesday, January 29, 2025:
Dow: 44,713.52, -136.83 (-0.31%)
NASDAQ: 19,632.32, -101.26 (-0.51%)
S&P 500: 6,039.31, -28.39 (-0.47%)
NYSE Composite: 19,927.47, -43.15 (-0.22%)
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