Stock Market Update

[BRIEFING.COM] The stock market rallied in the mid-week session. There was a positive bias in the early going and buying interest increased following the 2:00 ET FOMC decision and Fed Chair Powell's subsequent press conference. 

The major indices closed near their session highs after the Federal Open Market Committee (FOMC) held rates steady, leaving the federal funds target range unchanged at 4.25-4.50% in a unanimous vote.

 Fed Governor Waller dissented—not on the rate decision itself, but on the pace of balance sheet reduction. His preference to maintain the current level of securities runoff was overruled as the committee opted to slow the monthly runoff of Treasury securities from $25 billion to $5 billion starting April 1, while keeping mortgage-backed securities runoff unchanged at $35 billion.

The committee’s directive also acknowledged rising economic uncertainty while maintaining that the Fed remains attentive to both sides of its dual mandate.

The latest Summary of Economic Projections (SEP) complicates the narrative. The Fed lowered its 2025 GDP growth forecast from 2.1% to 1.7% while simultaneously raising its PCE inflation projection from 2.5% to 2.7% (core PCE ticked up from 2.5% to 2.8%). Despite this, the median estimate for the fed funds rate held steady at 3.9%, implying an expectation for two rate cuts this year.

Weaker growth estimates paired with a steady inflation outlook and rate cut projections indicates the central bank is more concerned with stubborn inflation than slowing growth.

During his press conference, Fed Chairman Powell again said that there is no rush to adjust policy. He warned that it is "going to be very difficult to have a precise assessment of how much inflation is coming from tariffs."

He indicated that it's "kind of the base case" that inflationary pressures from tariffs would be transitory, adding that the last time tariffs were imposed, the increase in prices was transitory.

Mega cap shares led the upside charge in equities, exhibiting rebound activity after leading declines yesterday. The Vanguard Mega Cap Growth ETF (MGK) closed 1.4% higher.

A sharp drop in rates also contributed to the upside bias in stocks. The 10-yr yield settled three basis points lower at 4.26% and the 2-yr yield settled six basis points lower at 3.98%.

• Dow Jones Industrial Average: -1.4% YTD
• S&P 500: -3.5% YTD
• S&P Midcap 400: -4.4% YTD
• Russell 2000: -6.6% YTD
• Nasdaq Composite: -8.1% YTD

Reviewing today's economic data:

• Weekly MBA Mortgage Applications -6.2%; Prior 11.2%
• Weekly EIA Crude Oil Inventories showed a build of 1.75 million barrels following last week's build of 1.45 million barrels

Looking ahead to Thursday, market participants receive the following data:

• 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 220,000), Continuing Claims (prior 1.870 mln), Q4 Current Account Balance (Briefing.com consensus -$334.0 bln; prior -$131.4 bln), and March Philadelphia Fed Survey (Briefing.com consensus 10.0; prior 18.1)
• 10:00 ET: February Existing Home Sales (Briefing.com consensus 3.95 mln; prior 4.08 mln) and February Leading Indicators (Briefing.com consensus -0.2%; prior -0.3%)
• 10:30 ET: Weekly natural gas inventories (prior -62 bcf)