On Wednesday, the Federal Reserve reminded markets that its interest rate policy mattered more than Trump tariffs. Fed Chair Powell announced a 25 basis point cut in December. However, it projected a slower pace of further cuts in 2025.
The Fed said that unemployment rates are still low while inflation remains somewhat elevated. More importantly, it said, “In considering the extent and timing of additional adjustments to the target range … the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.” The Fed indicated that it will be more data-dependent in its decision-making. That could mean that rates will not change after the Jan. 28-29, 2024 meeting.
Markets sold off stocks trading at a premium. The Nasdaq (QQQ) lost 3.56%, led by Amazon (AMZN), Microsoft (MSFT), Broadcom (AVGO), Alphabet (GOOG), and Meta Platforms (META). Tesla (TSLA) shares lost 8.28% yesterday.
The markets did not spare most stocks. Banks like Citigroup (C) and Bank of America (BAC) declined. When rate cuts slow, the economy potentially slows down. That lowers the number of deals for banks.
After relentless selling, UnitedHealth (UNH), CVS Health (CVS), and Cigna (CI) traded higher. Humana (HUM) and Centene (CNC) also bounced back. Investors are betting that the government will not successfully separate PBMs from health insurers.
