Fed Commits To Low Rates But Nasdaq Drags Market Lower

Hi Everyone,

Growth sensitive stocks had a great day, even considering the late-day selloff, with energy-related issues, financials, and industrial all performing better-than-average. Real estate stocks had another strong day, thanks to the Fed’s announcements and the much better-than-expected NAHB Housing Market Index, and housing is set to remain the engine of domestic stocks. Tech stocks failed to extend their winning streak, and the weakness among the most valuable stocks of the sector could mean that the Nasdaq will retest its correction low before the pullback is over.

Traders said that the major indices dipped back to their short-term trading range following the Fed’s announcements, confirming that bulls are still not out of the woods. As one trader explained, “While there was nothing scary in today’s Fed announcements, stocks reacted in a bearish fashion, especially in the tech sector, so we might be in for another battle for the 50-day moving averages.”

The Fed signaled that it will keep interest rates at their current record-low levels, in line with analyst expectations, as Jerome Powell & Co. does not expect inflation to hit 2.0% in the coming years. The Central Bank also upgraded its GDP projection, which is unsurprising with the recent string of positive economic surprises in mind, but the market still deemed the Fed’s stance as hawkish, judging by the initial uptick in Treasury yields. The fact that two FOMC members dissented against the decision means that, despite the pledge, the Fed’s multi-year interest rate schedule might not be set in stone.

Crude oil blasted higher today, as U.S. inventories fell by more-than-expected, and Hurricane Sally made landfall in Louisiana as a Category 2 storm. Forecasts continue to agree that “historic” flooding is expected in the region, which could lead to oil supply cuts into the coming week. Over a quarter of the region’s output is already shut down, and so it’s no surprise that the WTI contract surged back above the $40 per barrel price level, hitting a one-week high, and boosting the battered energy sector.

“Never let the fear of striking out keep you from playing the game.”

Babe Ruth

As always, have a great evening and stay tuned!!!


Joseph Esposito

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