Ahead of the meeting of the Federal Open Markets Committee on May 1, recent inflation prints had some speculating that Fed Chair Jerome Powell might signal a future hawkish pivot and hint at possible rate hikes soon. Fundstrat Head of Research Tom Lee saw it differently.
After the meeting, the Fed left rates unchanged and announced its intentions to slow its quantitative tightening (QT). Powell also reiterated the central bank’s overall confidence and its base view that inflation is going to fall throughout the year. That led Lee to conclude: “The hawks were wrong. The Fed remains dovish.”
For Fundstrat Washington Policy Strategist Tom Block, a key moment came when Powell was asked about the possibility of rate hikes: “I think it is unlikely the next move will be an increase,” Powell said. To Block, a Beltway veteran of many press conferences, “Powell and his staff anticipated such a question. It was clear that his response had been well-rehearsed and intended to pre-empt that line of questioning.”
Powell also told reporters that strong labor markets do not preclude the possibility of rate cuts. “I just want to be careful that we don’t target wage growth or the labor market,” he said, hinting that the Fed might consider easing if the labor market weakens. On the heels of soft job numbers on Friday, those remarks could take on added significance. In Lee's view, soft jobs numbers could inject confidence into the markets, pull forward the odds of a cut, and break the market's current pattern of “two steps forward, one step back.”
On Apple
Head of Technical Strategy Mark Newton has observed that “Since the latter part of December, Apple has fallen from almost 200 down to 160." That has affected not just its shareholders, but the market as a whole, given that Apple (AAPL -0.07% ) is roughly 8% of the S&P 500 and almost 12% of the QQQ 0.83% . On Friday, Apple finally broke its downtrend, moving above $180 in response to a post-close Thursday earnings report which the Cupertino company beat estimates and announced a $110 billion share buyback program and dividend increase. The "confirmed breakout" puts Technology and equities in general on "much better footing," in Newton's view.
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