©®™Uguba™ndubuisi™blog |: The Fed gave stocks a reprieve, but the all-clear is a ways off

Friday 24 March 2023

The Fed gave stocks a reprieve, but the all-clear is a ways off

Yahoo Finance Morning Brief withh Myles Udland and Sam Ro

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Friday, Mar 24

Today's newsletter is by Jared Blikre, a reporter focused on the markets on Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go with Yahoo Finance App.

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Stocks partially clawed back Wednesday's post-Fed losses on Thurday, with the Nasdaq Composite (^IXIC) notching a gain of of 1.0%, while the Russell 2000 (^RUT) settled in the red, down 0.4%.

On the one hand, investors are weighing Powell's hawkish, inflation-fighting comments. On the other, they're weighing signs that the Fed is de facto entering wait-and-see mode — believing its work is nearly done.

While Powell said the Fed may still have to raise rates further, he came clear saying the Committee was inches away from a no-hike decision on Wednesday.

"[W]e did consider [a pause] in the days running up to the meeting," he said.
This is the closest yet the Fed has come to a change in its uber-hawkish tone since it began its breakneck pace of rate hikes one year ago.

But don't call it a "pivot," and don't sound the all-clear for investors just yet.

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The major U.S. indices have been in rally mode since the Fed created a new liquidity facility a week ago last Monday to backstop regional banks. Tech stocks have been the biggest beneficiary, with the Nasdaq 100 (^NDX) up 7.6%.

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Long-term rates crashed over these nine trading sessions, which fueled rallies in megacaps like Amazon (AMZN), Microsoft (MSFT), Tesla (TSLA), Alphabet (GOOGL, GOOG), and Meta (META) — which all rallied double-digits. Chipmakers Nvidia (NVDA) and Advanced Micro Devices (AMD) led the way — up 19% and 23%, respectively.

Yet the rally was not broad-based. Not surprisingly, financials suffered additional damage from the bank panic. The S&P 500 Select Financial SPDR Fund (XLF) erased the last of its pandemic gains Thursday. Meanwhile, the SPDR S&P Regional Bank ETF (KRE) sank to a new crisis low — the lowest level since November 2020.

Putting the narrow breadth of the latest rally aside for a minute, even the technicals on the tech trade are showing some cracks.

Zooming out on the Nasdaq 100 reveals it has been stuck in a giant trading range over the last year — roughly 10,500 to 13,000. And it is once again testing that upper bound, having failed there as recently as early February.

The catalyst of lower rates and a weaker dollar are also approaching some big levels, with the U.S. 10-year Treasury-note (^TNX) hugging the 3.4% level by the 2023 lows.

Even the greatest bellwether stock of all, Apple, is up against some tough technicals that suggest its rally may need a "pause" before rallying materially above $165.

Without a fresh catalyst and narrative, investors chasing momentum and breakouts are more likely to be punished than rewarded.

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In the meantime, Kenneth Rogoff, Maurits C. Boas chair of International Economics at Harvard University, has a message for investors who are betting on the banking crisis abating.

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"If we're looking at the world as a whole, I believe we're just experiencing the first wave of this, and there are more to come," said Rogoff on Yahoo Finance Live Thursday.