Jerome Powell just gave the bull market a gut check

Jerome Powell just gave the bull market a gut check

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Good morning investors. The last Fed meeting of the year simultaneously met expectations yet also tanked markets.

Today’s edition unpacks what to know to sound smarter at the water cooler.


Inflation ain’t going away

The Fed gave markets what they expected but not in the tone they wanted. 

The Federal Reserve delivered a quarter-point rate cut on Wednesday, in line with expectations. However, Jerome Powell’s cautionary remarks sent stocks to their worst one-day loss since August 5.

In an updated outlook, the central bank signaled that it anticipates lowering interest rates just twice in 2025, down from the four it had forecast in September.

Inflation, in policymakers' view, won’t fall to their 2% target until 2027. 

In a note Wednesday evening, Bank of America dubbed it “as hawkish a rate cut as one could imagine.” 

In other words, officials see inflation — and therefore, rates — staying higher for longer. 

“Today was a closer call, but we decided it was the right call,” Powell said during the press conference. “From here it’s a new phase, and we’re going to be cautious about further cuts.”

The Dow Jones Industrial Average fell for its 10th session in a row, marking its worst losing streak since 1974.

At the same time, all 11 of the S&P 500’s major sectors declined.

“[The] sell off has pretty much wiped out all of the post-election gains across the board,” said Michael Reinking, CFA , senior market strategist at NYSE .

Eleven of 12 central bankers voted in favor of the quarter-point cut, which brought the federal funds rate into the 4.25% and 4.5% range. 

“The market is going to have to come to grips with a potentially less accommodative Fed,” said Eric Merlis , co-head of global markets at Citizens .

Meanwhile, the number of FOMC participants who reported seeing upside risks to inflation rose from three to 15, according to data from Charles Schwab strategist Kevin Gordon .

Not only is that the highest number of concerned members since December 2022, but it’s the biggest-ever jump from one meeting to the next. 

“Members of the FOMC have resorted to the fact that the inflation beast will be a bit tougher to slay,” Gordon told me after the press conference. “In the context of relatively strong growth, that isn’t a bad thing, but it was bad enough news to tip the market over — mostly because of how frothy sentiment was heading into the decision.”

Do you think the Fed made the right decision with its rate cut and messaging? Let me know in the comments.


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Mohamad Azmi Muslimin

Private Investor | Chairman (Investment & Asset Management Sub-Committee) | Former Council & Exco Member (VP of Finance) | Former Company Chairman | Former Temasek Professional

2d

Healthy correction. Corrections in bull markets are normal. For long term investors (30 years and beyond investment time horizon), market corrections, crashes, dislocations and short term bear markets are opportunities to accumulate at lower prices via DCA. Time in the market beats timing the market.

Luis Ricardo Sanchez

Full Stack Developer for Web and Mobile, Blockchain Developer & Trading Enthusiast | Project Manager & Vlogger | JS/TS | Node | React (Native) | Angular | MongoDB | PostgreSQL | GCP/AWS/Azure

3d

Tone drives investors' sentiment. We will see how deep this cautious FED intentions will dig us into our entry-level

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Kayla Addison

Board Member | Strategic Leader in Event Planning | Creative Innovator with Global Experience

3d

It has to be said that the reassessment of the Fed's interest rate outlook has led to volatility in market sentiment, affecting the performance of the stock market and other assets. I'm wondering exactly how far-reaching an impact this has had on market sentiment?

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Rob Statham

Custom Creating and Curating Memorable and Lasting Events that Radically Increase Engagement/ROI/Relationships Through Wine and Beer Tastings, Guided Mixology, Event Project Management. Let's Connect And Talk!

3d

The Feds dropped the ball big time on this and now we are all paying in the near term. In the longer term crypto and stocks will boom.

bob phillips

veteran owned business at bnbretailsalesofwvllc

3d

i have stock in PGYC mantis has taken patriot energy over i have searched and found that your group gemspring has taken over mantis i was wondering what is the future for patriot energy stocks? or can you help me find someone to ask thank you for your time sir i know you are very busy bobby phillips small business investor

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