Daily Brief - Forget about it

TLDR: In the latest FOMC, the Fed has maintained the funds rate in the range of 5.25% – 5.50%. This decision aligns with market expectations but throws cold water on the prospects of an early rate cut.

First, let's address the elephant in the room: The Fed did not commit to imminent rate cuts, but it's inching closer to that direction. The Committee dropped the language that previously left the door open for future hikes, signaling a potential shift towards rate reductions.

Despite a downward trend in core PCE, which stands at 2.93%, and a six-month annualized rate of 1.90%, Chairman Powell emphasized the need for greater confidence that inflation is steadily moving towards the Fed's 2% target.

This cautious stance reflects a broader market sentiment. While some anticipated rate cuts as early as March, Powell hinted this might be unlikely. Yet some traders still remain optimistic about a March cut.

The markets reacted with a bit of a seesaw effect, reflecting the uncertainty about the timing of these cuts. As we move forward, the focus will be on the continuation of positive inflation and labor market data, particularly in the services sector.

Market Movers: If yields remain below 4%?

Here is the historical performance of SPX stocks on a median basis post 10Y yields under 4%:

The top 3 performing stocks:

1. Netflix (NFLX) with a 6-month return of 23.86%
2. Nvidia (NVDA) with a 6-month return of 18.34%
3. Old Dominion Freight Line (ODFL) with a 6-month return of 17.58%

The bottom 3 performing stocks:

1. Lumen Technologies (LUMN) with a 6-month return of -4.03%
2. AT&T (T) with a 6-month return of -2.04%
3. Ford Motor (F) with a 6-month return of -1.60%

Earnings Update: Meta reports tonight

For Meta's Q4 earnings, analysts have set high expectations, forecasting a revenue growth of 21.8% year-on-year to $39.17 billion, with adjusted earnings expected to hit $4.97 per share.

The consumer internet sector, where Meta operates, has seen varied performance among its peers, with companies like Netflix and Match Group reporting revenue growth of 12.5% and 10.2% year-on-year, respectively.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.

Asset Spotlight: How low can Tesla go?

In reviewing 15 similar cases where Tesla's one-month return fell below 24.6%, it has typically been observed that the stock price tends to recover over the subsequent six months.

However, Tesla's announcement of expected lower production growth relative to 2023, alongside profitability concerns due to ongoing cost-reduction initiatives, has pressured margins and heightened investor apprehensions.