Equity Markets Gain Amid Federal Reserve Decision
Equity markets closed higher on Wednesday after the Federal Reserve kept interest rates unchanged and reaffirmed its outlook for potential policy easing in 2025. The S&P 500 rose 1.1% to 5,675.3, the Nasdaq Composite gained 1.4% to 17,750.8, and the Dow Jones Industrial Average advanced 0.9% to 41,964.6, with all sectors finishing in positive territory.
Market sentiment was supported by Fed Chair Jerome Powell’s reassurance that there was no urgency to adjust policy, despite the central bank acknowledging rising economic uncertainties. Bond yields moved lower, with the 10-year Treasury yield settling at 4.25%, reflecting expectations of looser monetary policy in the future.
Corporate Earnings and Sector Highlights
Investor optimism extended to corporate earnings, with several notable stock movements:
- Boeing shares rallied 6.8% after the company projected lower-than-expected cash burn for the first quarter.
- Tesla surged 4.7% after securing regulatory approval in California for its Robotaxi business.
- General Mills declined 2.1% following a weaker revenue outlook.
Meanwhile, concerns over fiscal policy and trade uncertainties weighed on the mergers and acquisitions outlook, prompting Oppenheimer to downgrade Goldman Sachs, Jefferies Financial Group, and Carlyle Group. Despite lingering market volatility, historical data suggests that such pullbacks are typical, and investors remain focused on long-term opportunities amid a resilient economic backdrop.
Global Market and Economic Update
Asia-Pacific Markets
Asian markets mostly rose:
- Australia’s ASX 200 gained 1.1%, driven by rising rate cut expectations.
- South Korea’s KOSPI added 0.5%.
- Singapore’s Straits Times Index increased 0.7%.
- Hong Kong’s Hang Seng Index dropped 1.1%, as investors took profits from tech stocks like Tencent and Alibaba.
- China’s CSI 300 and Shanghai Composite also edged lower.
U.S. and European Markets
U.S. equity futures rose overnight, with the S&P 500, Nasdaq 100, and Dow Jones posting modest gains. However, market sentiment remained cautious amid economic uncertainty and trade tariff concerns.
European equities continued their positive momentum:
- STOXX 50 climbed 0.5% to 5,510.
- STOXX 600 added 0.3% to 556.
- Gains were driven by consumer discretionary stocks like Hermès and Inditex, as well as industrials such as Schneider Electric and Safran.
- Defence equities saw a pause after a period of strong growth.
Currency and Commodity Market Trends
- The dollar index remained near a five-month low at 103.4, reflecting the Federal Reserve’s decision to keep rates steady while maintaining its outlook for two rate cuts this year.
- The euro traded at 1.0893 against the dollar, with markets anticipating a first rate cut in June or July, influenced by the Fed’s updated growth and inflation forecasts.
- Oil prices rose, driven by:
- Stronger U.S. demand outlook following larger-than-expected fuel inventory drawdowns.
- Weaker dollar.
- Geopolitical tensions, including Israel’s renewed Gaza offensive and U.S. airstrikes on Houthi targets.
- Potential ceasefire talks between Russia and Ukraine, raising hopes for eased sanctions and increased supply.
Equities on the Move
Notable Stock Developments
- Amazon is exploring an expansion into the used-car market, potentially disrupting the sector with its logistics network and digital marketplace expertise. This move could increase competition for Carvana and CarMax.
- Nvidia CEO Jensen Huang announced plans to invest hundreds of billions in U.S.-made chips and electronics over the next four years, amid shifting trade policies and competition from Huawei. He also stated that humanoid robots will be widely used in manufacturing within five years, with robots potentially costing around $100,000 to rent.
- Prudential plc reported an 8% rise in adjusted operating profit to $3.13 billion for fiscal 2024, driven by strong performance in Asia and Africa. The insurer also saw a 12% rise in bancassurance new business profit and declared a total dividend of 23.13 cents per share for the year.
- General Mills lowered its full-year sales and profit forecasts, citing weaker demand for snacks and pet food in North America and competition from private-label brands. The company now expects:
- Organic sales to decline by 1.5% to 2%.
- Adjusted profit to drop by 7% to 8%.
- HSBC Holdings is in advanced discussions to sell its German fund administration business, Inka, to BlackFin Capital Partners, with assets under administration worth approximately €400 billion. The deal could be finalized in the coming weeks.
- Pfizer sold its entire 7.3% stake in Haleon for approximately £2.5 billion, with Haleon agreeing to buy back 44 million shares. Following the sale, BlackRock will become Haleon’s largest shareholder, holding over a 5% stake.
- UniCredit CEO Andrea Orcel stated that he may wait until 2027 to decide on pursuing a full takeover of Commerzbank, citing Germany’s fiscal plans inflating the bank’s share price. He also noted delays in European banking M&A due to regulatory approvals and government opposition.
- Siemens reported hesitation among U.S. customers due to political uncertainties, impacting decision-making. However, the company remains optimistic about long-term demand, with a €118 billion order backlog.
Analyst Ratings & Forecasts
- Baird maintained a near-term bearish and long-term positive outlook on Tesla, citing production challenges and Model Y re-ramping issues.
- Bank of America expects Boeing’s aircraft deliveries to rise significantly by March-end, with 737 deliveries matching January levels. However, 787 deliveries have yet to occur this month.
- Guggenheim analyst Michael Morris reiterated a Buy rating on Roku, citing strong streaming growth and monetization potential.
- Compass upgraded Affirm Holdings to Buy from Neutral, raising its price target to $64, arguing that the selloff after losing Walmart’s partnership was excessive.
- Morgan Stanley raised its Rheinmetall price target to €2,000, with a “blue-sky” scenario suggesting €3,000 if European defence spending rises to 3% of GDP.
- RBC Capital Markets upgraded Schneider Electric to Outperform from Underperform, citing attractive valuation and strong organic growth potential.
- Deutsche Bank initiated coverage on Ferrovial with a “Buy” rating and a price target of €48, citing pricing power and earnings growth potential.
Key Economic Events & Upcoming Data
- Weekly U.S. jobless claims data will provide further insight into the labour market.
- Investors are watching earnings reports from Nike, FedEx, Micron Technology, and Darden Restaurants for broader economic trends.
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