Tag: Federal Budget

The Week of The Fed

“I don’t stop when I’m tired, I stop when I’m done. ” -David Goggins

THE WEEK OF THE FED

Friday, March (3/19) Closing Price

TABLE OF CONTENTS
  1. Review of Past Week: News and events 3/15 -3/19
  2. Review of Past Week: Earnings 3/15 – 3/19
  3. Upcoming Week: Talks and events 
  4. Upcoming Week: Earnings from 3/22 – 3/26 
  5. Educational Learning Segment

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Jerome Powell Speaks and the Market goes Parabolic

Markets reacted exceptionally well to Jerome Powell’s press release on Wednesday afternoon, with the S&P500 climbing nearly .64%. Some of the highlights from his recap of the FOMC (Federal Open Market Committee).

  • Projecting GDP Growth of 6.4%
  • Unemployment down to 4.5% by the end of the year
  • Inflation is currently below 2% projections
  • Federal Funds Rate to remain at 0 – .25% in the near future
  • Continue purchasing Treasury Securities and Mortgage-Backed Securities
  • Household Spending on goods is strong
  • Household Spending on services is weak

Let’s Break This Down

First and foremost, a GDP projection of 6.4% is an extremely healthy sign of a roaring back economy in 2021. In the last 50 years, the United States has reached a GDP growth rate of over 6% three times. This growth rate would mark an extraordinary bounce-back of the economy within the next 6-10 months. This is primarily due to vaccinations and herd immunity. Additionally, Powell highlighted a lower unemployment rate heading into 2022 as another indicator of a stronger economy. He did highlight that this figure may be slightly lower due to some individuals not participating in the labor market. He made sure to reiterate the position that inflation is well below their 2% projections for this year, and moving forward, we can begin to see it rise due to March and April data from 2020 leaving the picture.

When those two months are out of the data, we will see a “transitory” spike in inflation to around 2.4%. These remarks sent the 10-Year Treasury Yield on Thursday to a new 52-Week high of 1.75%, which subsequently took away all of the market gains from the day before. Most notably, in his speech, Powell remained steadfast on Interest Rates remaining at near 0%. He wants to wait “for actual data and not forecasts” to indicate that Inflation is above their 2% target for an extended period before raising rates. Lastly, Powell noted that supply might be bottlenecked for the next year with production not keeping up with such increased demand.


The Fed Declined to Extend Bank Lower Capital Requirements

One Friday, banks, including Chase, Citi Bank, Wells Fargo, and Goldman Sachs all took a dip after the Fed declined to extend a pandemic-era exemption that allowed them lowered capital requirements.

The brieftly stated that they will allow the exempation to expire on March 31st that has been in place since April of last year.

The decision to relax the capital requirements has been widely viewed as key to calming what had been tumultuous Treasury markets in the early days of the Covid-19 pandemic. A need for cash had caused a massive sell-off in the bond market that the Fed helped to cover through its liquidity programs.

“The Board will take appropriate actions to assure that any changes to the SLR do not erode the overall strength of bank capital requirements,” the Fed said in a statement.

Bank stocks were sharply lower following the announcement, pulling down the broader market, but government bond yields were mixed.


Earnings Recap 3/15 – 2/19

Retail Therapy is Still As Active As Ever

On Friday, Fedex’s trading price increased over 6% after having better than expected earnings. On top of additional spending by consumers, FedEx is one of the leading logistics companies in the effort to deliver Covid-19 Vaccines across the globe. Operating Income increased primarily due to the increase of domestic spending by consumers. With household spending on goods remaining strong in the near future, FedEx will continue to have excellent earnings. FedEx is continually partnering with online retailers to be their logistics provider, and this will continue to increase revenue.

Some takeaways, while FedEx may have astronomical numbers, they are inflated due to Covid-19. Individuals, businesses, and families are all remaining home and using online shopping as a convenient way to get things. We can see FedEx’s earnings slowly normalize in the next few quarters  due to more in-person shopping and normalcy.

UPCOMING WEEK 3/22 – 3/26

EVENTS & TALKS
UPCOMING WEEK’S EARNINGS 3/22 – 3/26
EDUCATIONAL LEARNING SEGMENT
Is Buying the Dip Dead?

March 4th, 2020 : Stock Market Crashing, here’s why.

March 4, 2021

Indices Around The Globe

  • S&P 500 Futures moved below 3,780 for the first time since late January, down 1.25% for the trading session.
  • UK’s FTSE 100 down 0.37% to near 6,650
  • Japan’s Nikkei 225 down 2.13% to near 28,930

Bonds

  • 10-year treasury yield at 1.55%

Commodities

  • Crude oil up 4.72% to near $64.17/barrel, highest in over a year.
  • Gold down 0.91% to near $1,699/oz
  • Silver down 2.92% to near $25.40/oz

Crypto

  • Bitcoin down 4.95% over the last 24 hours to near $48,067

Top News

  • Federal Reserve Chairman Jerome Powell spoke on the state of the U.S. economy at the Wall Street Journal’s Jobs Summit
  • U.S. Initial Jobless Claims data for the last week of February showed a week-over-week increase in new unemployment.
  • U.S. Senate plans to vote on President Joe Biden’s COVID-19 plan at 1 p.m. on Thursday.
  • Costco (NASDAQ:COST) reported worse-than-expected Q2 EPS results. The stock moved lower in after-hours trade.
  • Slack (NYSE:WORK) reported better-than-expected Q4 earnings results. The stock moved slightly higher in after-hours trade.
  • Connecticut’s Governor, Ned Lamont, made an announcement to ease some COVID-19 restrictions in the state. Beginning Friday, March 19, capacity limits will be eliminated for restaurants, retail stores, libraries, and personal services businesses. Face masks, social distancing, and other cleaning protocols will remain in force.

Preview for Friday, March 5

  • Nonfarm Payrolls – 8:30 a.m. EST
  • Unemployment Rate – 8:30 a.m. EST
  • Federal Budget – 2 p.m. EST
  • Baker Hughes Total Rig Count – 1 p.m. EST