Equity markets were looking to rebound this week after several weeks of declines. Will decisions by the Federal Reserve Bank help bring more stability to the economy?
Monday
S&P 500 0.64% | NASDAQ 0.31%
Core retail sales contributed to a positive trading day on Monday. The data (which strips out automobile sales) met expectations. Big ticket purchases are slowing with income being spent more on the necessities.
Tuesday
S&P 500 1.07% | NASDAQ 1.71%
Markets reversed course on Tuesday as the Federal Reserve sat down for the first day of their March meeting. Markets expect no changes from the Federal Reserve Bank as tariffs and economic slowing weigh on sentiment.
Wednesday
S&P 500 1.08% | NASDAQ 1.14%
Investors pounced on yesterday’s pullback in a bid for equities, almost negating losses across indexes. A data-dependent Federal Reserve underscored their commitment to not letting surveys dictate the direction of the U.S. economy. Rates were unchanged at 4.25%-4.5%.
Thursday
S&P 500 0.22% | NASDAQ 0.33%
The Wednesday rally stalled on Thursday following the Federal Reserve’s interest rate decision. Jobless claim reports have maintained normal levels against a backdrop of possible increase in layoffs. An increase in claims would indicate a strained outlook in the private sector and that doesn’t appear to be the case through Mid-March.
Friday
S&P 500 0.08% | NASDAQ 0.52%
Technology stocks rallied to close out the week. In a month that has not been too kind to equity markets, the major indexes were able to hold onto gains through the close.
Conclusion
S&P 500 0.51% | NASDAQ 0.17%
Markets stopped their skid after a month-long fall but remain in correction territory. The fall since February 19th has accelerated amid the turmoil of tariffs, economic slowdowns, a weaker dollar, and corporate growth outlook. GDP forecasts have improved in recent weeks but are still negative, indicating that there are still unknowns in an ever-changing market environment. The Federal Reserve, however, remained calm in a current climate that needs it. Although they didn’t change interest rates (the rate at which borrowing occurs), they did reduce the number of bonds on their balance sheet. This means that they want to keep the money supply tight to reduce inflation. If they were to continue to buy bonds, this would push more money into the economy, which they want to do the opposite. They are slowly reducing their holdings on the historically high balance sheet to gradually bring down inflation. This doesn’t happen overnight, but the Federal Reserve made the decision to lower the amount of the bonds they reinvest from $25 Billion to $5 Billion each month. With a more restrictive approach, the Federal Reserve will need to be careful in the months ahead.
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