Fed Chairman Powell tried to pour water on the current stock market rally last week by taking a March rate cut off the table in comments following the Fed's first meeting of 2024.
While the Fed's comments were much more dovish in December, last week's hawkish tone caused stocks to drop by 1.6% on Wednesday. However, strong corporate earnings and a better-than-expected jobs report helped equities finish another week in the green. In comments that aired last night on 60 minutes, Powell indicated that the Fed would likely only cut 3 times, starting in May. This stands in contrast to the December "Dot-Plot," which indicated more than 3 cuts. Fed futures show only a 54% probability of a rate cut in May.
With at least 46% of S&P 500 companies having reported 4th quarter earnings, 72% have beat on expectations.
In fact, on a year-over-year basis, earnings growth is up 16%. Last week, the Atlanta Fed increased their projections for 1st quarter GDP from +3.0% to +4.2%. The Jobs Report on Friday surprised the market as 353,000 jobs were added in January, much higher than expected, and December's number was revised higher by 117,000. Powell verified as much in his comments last night stating that the Labor Market remains "very healthy." In fact, while some are touting recent headline job cuts, layoffs overall are lower than this time last year and trending down. Expect volatility to pick up as seasonality suggests a weaker February, especially in an election year.
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