Stocks Jump as Fed Backs Rate-Cut Forecast

The S&P 500 Index ($SPX) (SPY) today is up +1.59%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.96%.  March E-mini S&P futures (ESH25) are up +1.59%, and March E-mini Nasdaq futures (NQH25) are up +1.92%. 

Stock indexes today extended early gains after the results of today’s FOMC meeting.  As expected, there was no change to the 4.25%-4.50% federal funds target range, and investors cheered the FOMC's affirmed guidance for two quarter-point cuts in 2025, even as the committee noted that “Uncertainty around the economic outlook has increased.”

A rebound in the Magnificent Seven stocks today from Tuesday’s selloff also supports gains in the broader market.  Tesla is up more than +2% after California approved the company to begin carrying passengers in its vehicles in a step toward ride-hailing services.  Also, Nvidia is up more than +1% after CEO Huang, at an AI conference, unveiled more powerful chips and related technology that he said would provide a clearer payoff to customers. 

US MBA mortgage applications fell -6.2% in the week ended March 14, with the purchase mortgage applications sub-index up +0.1% and the refinancing mortgage sub-index down -12.8%.  The average 30-year fixed rate mortgage rose +5 bp to 6.72% from 6.67% in the prior week.

The Bank of Japan (BOJ) kept its overnight call rate unchanged at 0.50%, as expected, and cited worries over the potential impact of US tariff policies.

Geopolitical risks in the Middle East are negative for stocks. Israel on Tuesday launched a series of airstrikes across Gaza, ending a two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act “with increasing military strength” to free hostages and disarm Hamas.  Also, the US launched weekend strikes on Yemen’s Houthi rebels.  US Defense Secretary Hegseth said strikes would be “unrelenting” until the group stops attacking vessels in the Red Sea.  The Houthi rebels said they would respond by attacking US vessels in the Red Sea. 

According to the latest survey from Bank of America, investors cut their US stock holdings by 40 percentage points from the previous survey, the most on record, from 17% overweight in February to 23% underweight in March, while cash levels have risen to 4.1% from 3.5%, the biggest jump since 2020.

Stocks have been under pressure over the past two weeks due to fears that US tariffs will weaken economic growth and corporate earnings.  On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  On Sunday, Mr. Trump reiterated that he would impose reciprocal tariffs and additional sector-specific tariffs on foreign nations on April 2. 

The markets are discounting the chances at 1% for a -25 bp rate cut after today’s FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 rose to a 1-1/2 week high and is up +0.03%.  China’s Shanghai Composite Index fell from a 3-month high and closed down -0.10%.  Japan’s Nikkei Stock 225 fell from a 2-1/2 week high and closed down -0.25%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -6 ticks.  The 10-year T-note yield is up +1.1 bp to 4.295%.  June T-notes today are moderately lower as a rally in stocks curbs safe-haven demand for T-notes.  Also, long liquidation and position squaring are weighing on T-notes ahead of the results of the FOMC meeting later today.  Strength in European government bonds today is limiting losses in T-notes. 

European bond yields today are moving lower.  The 10-year German bund yield fell to a 2-week low of 2.745% and is down -1.3 bp to 2.797%.  The 10-year UK gilt yield fell to a 1-week low of 4.615% and is down -2.0 bp to 4.623%.

Eurozone Feb CPI was revised downward by -0.1 to 2.3% y/y from the previously reported 2.4% y/y.

Eurozone Q4 labor costs eased to +3.7% y/y from +4.5% in Q3, the smallest pace of increase in more than two years.

Swaps are discounting the chances at 55% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks’ strength today supports the overall market.  Tesla (TSLA) is up more than +2% after California granted the company approval to begin carrying passengers in its vehicles in a step toward fide-hailing services.  Also, Nvidia (NVDA) is up nearly +1% after CEO Huang, at an AI conference, unveiled more powerful chips and related technology that he said would provide a clearer payoff to customers.  In addition, Apple (AAPL) is up more than +1%, and Alphabet (GOOGL) is up +0.83%. Finally, Microsoft (MSFT) is up +0.71%. 

Boeing (BA) is up more than +6% to lead gainers in the S&P 500 and Dow Jones Industrials after the CFO said Q1 is broadly tracking according to expectations and that cash burn “could be in the hundreds of millions” of dollars better expected as working capital come down.

Autodesk (ADSK) is up more than +3% after the Wall Street Journal reported activist investor Starboard Value, who has a more than $500 million stake in the company, is preparing to wage a proxy fight at the company.

Signet Jewelers Ltd (SIG) is up more than +23% after saying sales are rebounding after a weak holiday period and expects Q1 revenue of $1.50 billion-$1.53 billion, above consensus of $1.50 billion. 

Venture Global LNG Inc (VG) is up more than +6% after Bloomberg reported that the Trump administration is prepared to give the company approval to export natural gas from a planned facility in Louisiana that had stalled under the prior administration. 

Affirm Holdings (AFRM) is up more than +6% after Compass Point Research & Trading upgraded the stock to buy from neutral with a price target of $64. 

Mosaic (MOS) is up more than +2% after Barclays upgraded the stock to overweight from equal weight with a price target of $33. 

RTX Corp (RTX) is up more than +1% after Baird upgraded the stock to outperform from neutral with a price target of $160. 

HealthEquity Inc (HQY) is down more than -19% after reporting Q4 adjusted EPS of 69 cents, below the consensus of 71 cents, and forecast 2026 adjusted EPS of $3.57-$3.74, the midpoint below the consensus of $3.70. 

Intel (INTC) is down more than -6% to lead losers in the S&P 500 and Nasdaq 100 after a Taiwan Semiconductor Manufacturing Co. board member dismissed a Reuters report that said his company had discussed a collaboration with Intel. 

Progressive Corp (PGR) is down more than -3% after reporting net premiums written for February of $6.68 billion, below expectations.

Quest Diagnostics (DGX) is down more than -3% after forecasting full-year adjusted EPS of $9.55-$9.80, the midpoint below the consensus of $9.71

Gilead Sciences (GILD) is down more than -3% after the Wall Street Journal reported that the US Department of Health and Human Services plans to cut feral government funding for domestic HIV. 

General Mills (GIS) is down more than -1% after cutting its full-year organic net sales forecast to -1.5% to -2.0% from a previous estimate of 0% to +1.0%, weaker than the consensus of -0.33%. 

Thor Industries (THO) is down more than -1% after Citigroup downgraded the stock to neutral from buy, citing reduced confidence in the recovery of the RV industry. 

Earnings Reports (3/19/2025)

Five Below Inc (FIVE), General Mills Inc (GIS), Ollie’s Bargain Outlet Holding (OLLI), Williams-Sonoma Inc (WSM).