Powell Disappoints, But Blowout Microsoft, Meta Results Push Market Higher
The Fed held interest rates steady as worries about tariff-driven inflation continue.
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The experts, the pundits, and the Fed have been wrong so far about tariffs creating increased inflation, but they aren’t yet willing to admit defeat. The Fed held interest rates at current levels on Wednesday, and Chair Jerome Powell emphasized that the central bank has to await further data before it decides what it will do at its next meeting, which isn’t until September.
The key comment that sums up the current view was: "What we see now is the very beginning of tariff inflation." Powell added that there is a strong argument that the inflationary impact of tariffs won’t last long, but he believes that there will be an impact coming.
There isn’t anything too surprising about Powell’s stance, but the market was hoping for just a hint of dovishness. It was favorable that two Fed members dissented from the decision, but that is cold comfort for the folks who wanted action now.
The market will now be focused on employment and inflation numbers that are released in the next two months. Plenty of data are due, and if tariffs are going to have an effect on inflation, then there should be some clear signs now that major trade deals are in place.
Another issue is the potential for a slowing jobs picture. Powell stated that while there is some weakness in job creation, there is also a decreasing supply of labor, so there isn’t any big spike in unemployment. That could change quickly and complicate the situation by creating the potential for stagflation.
Without the Fed riding to the rescue, the market will have to focus on earnings, valuations, and technical conditions.
Reports from Microsoft MSFT and Meta META are hitting after the bell Wednesday. Microsoft is a solid beat with Q4 EPS of $3.65 versus the consensus of $3.38, and Q4 revenue $76.44 billion versus the consensus of $73.84 billion.
Meta is also well ahead with EPS of $7.14 versus $5.88 consensus, and revenues of $47.52 billion versus $44.81 billion consensus.
Both stocks are sharply higher in after-hours trading to new all-time highs and have pushed the indexes to new highs as well.
Jerome who?
Have a good evening. I’ll see you Thursday.
At the time of publication, Rev Shark was long META.
