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Stocks Jump as the Fed Maintains Two Cuts

Stocks Jump as the Fed Maintains Two Cuts

  • 20.03.2025 17:42
  • msn.com
  • Keywords: Stock Market, Federal Reserve, Interest Rates

Stocks surged after the Federal Reserve maintained rates but signaled two rate cuts in 2025, with traders betting on two or three cuts by December. The decision boosted markets despite lingering uncertainty over whether the cuts reflect growth support or recession concerns.

SMCI ServicesNVDAsentiment_satisfiedCMEsentiment_neutralMS/PLsentiment_neutralNVDAsentiment_satisfied

Estimated market influence

Nvidia

Nvidia

Positivesentiment_satisfied
Analyst rating: Strong buy

Mentions Nvidia's Quantum Day event and potential quantum computing partnership, which could boost stock price.

CME Group

CME Group

Neutralsentiment_neutral
Analyst rating: Neutral

Provided data on Fed rate cut probabilities via their FedWatch Tool.

Federal Reserve

Positivesentiment_satisfied
Analyst rating: N/A

Maintained interest rates and projected two quarter-point cuts, leading to positive market reaction.

Wall Street

Positivesentiment_satisfied
Analyst rating: N/A

Stocks jumped after Fed announcement, indicating a positive impact on Wall Street.

Morgan Stanley

Neutralsentiment_neutral
Analyst rating: —

Cited in the article regarding investor sentiment and stock performance analysis.

Nvidia

Nvidia

Positivesentiment_satisfied
Analyst rating: Strong buy

Highlighted as a key player in quantum computing with potential partnerships leading to significant returns.

Context

Analysis of Fed Meeting and Market Implications

Key Facts and Data Points:

  • Fed Interest Rates: Maintained at 4.25%–4.50%, as widely expected.
  • Rate Cuts Projection:
    • Two quarter-point cuts projected for 2025 (unchanged from December forecast).
    • Two more quarter-point cuts expected in 2026.
  • Economic Projections:
    • GDP growth revised down to 1.7% for 2024 (from 2.1% in December).
    • Core inflation forecast raised to 2.8% (up from 2.5% in December).
  • Quantitative Tightening: Reduced from $25 billion to $5 billion monthly bond holdings reduction.
  • Market Reaction:
    • All major indexes rose, with Nasdaq up 1.4%.
    • Traders assign nearly identical probabilities (30%/32%) to two or three rate cuts by December 2025.

Market Trends and Business Impact:

  • Sentiment vs. Fundamentals: Short-term sentiment drives stock prices (~50%), while fundamentals (earnings) account for ~29% over one year.
  • Tariffs and Trade Policy: Fed acknowledges uncertainty around tariff impacts but expects one-time price increases.
  • Global Central Bank Dynamics: Weak economic growth in Asia, Europe, and North America may lead to further global rate cuts.

Competitive Dynamics and Strategy:

  • Louis Navellier's Outlook: Predicts four rate cuts in 2024, citing global central bank trends and weak economic conditions.
  • Investor Sentiment: Bearish sentiment risks self-fulfilling prophecy if trade tensions escalate, but strong earnings forecasts suggest potential buying opportunities.

Long-Term Effects and Risks:

  • Potential Recession Fears: Fed remains cautious, with Powell emphasizing "uncertainty" and strong labor markets.
  • Neutral Interest Rate: Fed actions may signal alignment with neutral rate to avoid economic harm.

Strategic Considerations:

  • Corporate Borrowing Costs: Lower rates reduce borrowing costs, boosting profits.
  • Investor Behavior: Low-rate environments often lead to higher P/E multiples.

Industry-Specific Insights:

  • Nvidia's Quantum Day: Expected announcement may drive partnerships and growth in quantum computing, benefiting small-cap stocks.

Regulatory and Policy Implications:

  • Fed's Dovish Signal: Reduced quantitative tightening seen as dovish, though Fed claims it’s unrelated to monetary policy stance.
  • Global Central Bank Coordination: Potential for coordinated rate cuts to stabilize global economies.