1. Fed Holds Rates, Pauses After Aggressive Cuts
The Federal Reserve kept interest rates steady after cutting a full percentage point over its last three meetings in 2024. With inflation still above target and economic growth holding firm, policymakers opted to wait for more data before deciding on further moves. Fed Chair Jerome Powell signaled a shift in confidence, replacing previous optimism about "progress" on inflation with a more cautious statement that "inflation remains somewhat elevated."
Powell press conf
2. Market Jitters and Powell’s Balancing Act
Markets initially tumbled after the Fed’s announcement, with bond yields rising and stocks declining. However, Powell’s press conference later softened the blow, leading to a recovery by the close. The $.SPX(.SPX)$ ended down 0.5%, while the Nasdaq and Dow each slipped 0.3%. Investors remain uncertain about inflation’s trajectory and the central bank’s next steps.
Tech
$Microsoft(MSFT)$ delivered beats on both earnings and revenue, but investors still found something to quibble with. After the DeepSeek freakout on Monday, Microsoft's capital spending was also under the spotlight. The tech giant spent a slightly higher-than-expected $15.8 billion during the quarter, up from $9.7 billion in the year-earlier period…
$Meta Platforms, Inc.(META)$ beat fourth quarter expectations by a lot. Earnings per share were up annually by 50% to $8.02, compared to Wall Street’s consensus estimate of $6.76, according to FactSet.
$Tesla Motors(TSLA)$ quarterly results, which weren't great and missed expectations. But investors appear more focused on the company's future.
3. Trump’s Response and Policy Uncertainty
President Donald Trump quickly criticized the Fed’s stance, vowing to take control of inflation through increased energy production, deregulation, and aggressive trade policies. Powell, however, refused to speculate on the economic impact of the administration’s plans, emphasizing that the Fed will adjust policy based on actual data rather than political rhetoric.
4. Rate Cut Expectations and the Road Ahead
Current market pricing suggests two quarter-point cuts by the end of 2025, but past forecasting errors highlight the unpredictability of economic trends. Just a year ago, investors expected 1.75 percentage points of cuts in 2024—only for the Fed to chart a more moderate path. Given shifting data and political developments, rate expectations remain fluid.
Conclusion
The Fed’s wait-and-see approach underscores the high level of economic and political uncertainty. While markets adjust to the central bank’s evolving stance, investors should brace for continued volatility.
The Calendar
$Apple(AAPL)$ Mastercard, Visa
$AAPL
The European Central Bank announces its monetary policy decision.
The Bureau of Economic Analysis releases its advance estimate of fourth-quarter gross domestic product growth.
The National Association of Realtors reports its Pending Home Sales Index for December.
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This summary is for informational purposes only and should not be considered financial advice. Always consult a professional before making investment decisions.
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