Stock Market Update
The stock market is continuing to face challenges regarding economic growth, corporate earnings, and tariffs. However, the S&P 500 increased by 0.5% and the Nasdaq Composite rose by 0.2%, breaking a four-week streak of losses. Meanwhile, the equal-weighted S&P 500 experienced a 0.7% rise compared to the previous Friday. Despite these gains, lingering concerns remain due to various factors, including the recent Federal Open Market Committee (FOMC) meeting.
FOMC Decisions
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The FOMC decided to maintain the current federal funds target range at 4.25-4.50%.
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Fed Governor Waller expressed dissent, not regarding the rate decision, but concerning the speed of balance sheet reduction.
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The committee announced a slowdown in the monthly reduction of Treasury securities from $25 billion to $5 billion starting April 1, while keeping the mortgage-backed securities reduction at $35 billion.
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In acknowledging rising economic uncertainty, the Fed reaffirmed its commitment to its dual mandate.
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The Summary of Economic Projections (SEP) adjusted the 2025 GDP growth forecast downward from 2.1% to 1.7% and raised the PCE inflation projection from 2.5% to 2.7%.
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The median fed funds rate estimate remains at 3.9%, indicating expectations for two rate cuts this year.
Market Reactions and Concerns
Fed Chairman Powell commented on the difficulty of evaluating the inflation impact from tariffs, suggesting that the inflationary pressures caused by tariffs may be temporary. The market remains alert to the possibility of reciprocal tariffs being announced on April 2.
Treasury Yields Movement
Treasury bonds concluded the week with gains. The yield on the 10-year bond dropped by six basis points to 4.25%, while the two-year yield declined by seven basis points to 3.95%.
Company Highlights
Boeing saw its stock surge by 5.2% after landing a significant contract to build the U.S. Air Force’s Next Generation Air Dominance fighter jet, valued at over $20 billion. This contract represents a crucial win for Boeing, set to replace Lockheed Martin’s F-22 Raptor, which caused Lockheed Martin shares to decrease by 5.1%.
Sector Breakdown
However, Micron Technology led a downturn in chip stocks, seeing an 8% drop due to pricing challenges affecting its gross margin despite surpassing quarterly estimates. This slump affected other semiconductor companies, with GlobalFoundries, Lattice Semiconductor, and Analog Devices all declining by about 2%. Nvidia and Advanced Micro Devices also fell nearly 2%.
Additional Company News
In other news, Cleveland-Cliffs saw a 1.8% decline after announcing the temporary idling of two Minnesota factories, impacting 630 workers, as part of efforts to manage working capital in light of trade tariffs. Meanwhile, Paramount Global and Verizon Communications could face obstacles in merger activities due to regulatory scrutiny on diversity and equity policies. Telus shares dropped 5% following a downgrade from Bank of America, which pointed to unsustainable leverage and high dividend payouts.
Conclusion
This article first appeared on GuruFocus.
