(Bloomberg) — Stocks slipped and short-dated bond yields rose, though both pared bigger moves as early concern that the Federal Reserve was growing more worried about inflation got tamped down by Chair Jerome Powell.
In late hours, a $328 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) whipsawed. Tesla Inc. climbed after saying it expects vehicle sales to rise this year after a challenging 2024. Meta Platforms Inc. rallied as its chief offered an upbeat outlook. International Business Machines Corp. soared after projecting strong revenue growth and a jump in AI-related bookings. Microsoft Corp. slid as growth in its cloud-computing business slowed.
The Federal Open Market Committee kept the federal funds rate in a range of 4.25%-4.5%. In a statement, officials repeated that inflation remains “somewhat elevated” but removed a reference to it having made progress toward their 2% goal. Later, Powell clarified the reference to inflation was just a decision to shorten the sentence, rather than send any sort of meaningful signal.
“Never mind, says Powell,” noted Peter Boockvar, author of The Boock Report. “Jay Powell in his presser said the tweaks in comments on the labor market and inflation in the FOMC statement should not be interpreted as a signal.”
To Krishna Guha at Evercore, Powell’s press conference is coming across as “appreciably less hawkish” than the statement updates.
The S&P 500 fell 0.5%. The Nasdaq 100 dropped 0.2%. The Dow Jones Industrial Average slid 0.3%.
The yield on two-year Treasuries rose two basis points to 4.21%. The Bloomberg Dollar Spot Index was little changed.
The tech space came under intense volatility earlier this week on concern that a cheap artificial intelligence-model from Chinese startup DeepSeek could make valuations of the technology that has powered the bull market tough to justify.
The recent volatility among tech giants has been particularly worrisome for Wall Street, as the S&P 500’s leadership hasn’t been this concentrated in more than 20 years. Data shows that less than one-third of index members were able to outperform the S&P 500 during the past two years, as Bank of America Corp. strategist Michael Hartnett has called out.
“The DeepSeek correction in tech stocks has not changed the overall concentration problem in the S&P 500,” said Torsten Slok at Apollo. “Investors in the S&P 500 continue to be dramatically over-exposed to the tech sector.”
The tech-led selloff in US equities at the start of this week was just a blip, given the positive outlook for the economy, according to Goldman Sachs Group Inc. strategists.
That slump isn’t a harbinger of a sustained decline in stocks, the Goldman team led by Peter Oppenheimer wrote in a note.
“Most bear markets are triggered by expectations of falling profits driven by fears of recession,” which has a low probability of occurring in the next 12 months, the strategists said.
Wall Street’s Reaction to Fed:
Overall, nothing is really changed in the Fed’s outlook. Powell believes that inflation remains on a slow but steady downtrend and the labor market and housing markets have started to firm which has helped to lift the stock prices.
Powell’s comments are simply that they want to see more information, but that they feel they have made long term progress on inflation and the labor markets remain strong. This is a win on both mandates.
I don’t think the Fed did anything catastrophic yet. They were hawkish a little bit, but there’s nothing really to derail a potential move of the lows if earnings were to come in favorably. I think it’s a good opportunity to keep in some dry powder going into earnings and buy the dip in US stocks.
The statement was a little hawkish, but policymakers are on hold with a long break until the March meeting. Data between now and then will set the tone for that next big decision.
In terms of guidance, the reality is that the Fed is simply trying to respond to the data and the new administration’s policies as they unfold. At times like these, when government policy – particularly tariff policy – is so uncertain, they do not have a forecasting edge. Keeping policy rates on hold until a clear direction starts to emerge is sensible.
But make no mistake, if next month brings a second consecutive soft inflation print, coupled with a slight weakening in jobs growth, we may start to hear a renewed dovish tone to Fedspeak.
We would continue to focus on why the Fed won’t cut anytime soon, specifically a strong economy and labor, which bodes well for solid corporate earnings growth.
We would be buyers of US large-cap, and the energy, communications services, financials, and industrials sectors on pullbacks.
The progress toward 2% inflation has stalled out, and the Fed knows it. They gave no indication in their post-meeting statement that a resumption of rate cuts is likely at the next meeting in March. It will take a run of good inflation data to get us there, whenever that may be.
With the data we have currently, the Fed would likely hold rates unchanged at their March 19 meeting. Solid income growth for most households over the past year has kept services inflation elevated. Businesses are expanding operations, consumers have a healthy appetite for travel and leisure, and animal spirits are still elevated. These conditions make it difficult for the Fed to cut rates without reigniting broad inflation pressures.
Corporate Highlights:
-
Trump Media and Technology Group Corp. launched a financial-services and fintech brand dubbed Truth.Fi, with a focus on crypto and customized exchange-traded funds.
-
Hewlett Packard Enterprise Co. representatives met with Donald Trump’s antitrust enforcers on Tuesday over its $14 billion bid to buy Juniper Networks Inc., according to people familiar with the matter.
-
Apple Inc. has been secretly working with SpaceX and T-Mobile US Inc. to add support for the Starlink network in its latest iPhone software, providing an alternative to the company’s in-house satellite-communication service.
-
ASML Holding NV reported booking orders worth twice as much as analysts expected, as the artificial intelligence boom fuels demand for its chipmaking machines.
-
Nasdaq Inc. Chief Executive Officer Adena Friedman said she expects a strong environment for initial public offerings in the second quarter and balance of 2025 as investors gain confidence from stabilizing interest rates and inflation.
-
Alibaba Group Holding Ltd. published benchmark scores and touted what it called world-leading performance with its new artificial intelligence model release.
-
T-Mobile US Inc. reported fourth-quarter results that beat analysts’ projections, benefiting from continued growth in wireless subscribers and home internet customers.
Key events this week:
-
Eurozone ECB rate decision, consumer confidence, unemployment, GDP, Thursday
-
US GDP, jobless claims, Thursday
-
Apple, Deutsche Bank earnings, Thursday
-
US personal income & spending, PCE inflation, employment cost index, Friday
Some of the main moves in markets:
Stocks
-
The S&P 500 fell 0.5% as of 4 p.m. New York time
-
The Nasdaq 100 fell 0.2%
-
The Dow Jones Industrial Average fell 0.3%
-
The MSCI World Index fell 0.3%
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro fell 0.2% to $1.0411
-
The British pound was little changed at $1.2439
-
The Japanese yen rose 0.1% to 155.35 per dollar
Cryptocurrencies
-
Bitcoin rose 4% to $104,279.26
-
Ether rose 2.8% to $3,138.57
Bonds
-
The yield on 10-year Treasuries was little changed at 4.53%
-
Germany’s 10-year yield advanced two basis points to 2.58%
-
Britain’s 10-year yield was little changed at 4.62%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jessica Menton, Natalia Kniazhevich, Margaryta Kirakosian, Sujata Rao and Aya Wagatsuma.
Most Read from Bloomberg Businessweek
©2025 Bloomberg L.P.
