• Stock futures declined, retreating after the previous day’s rally fueled by the Fed’s rate cut outlook.
• The Fed kept rates steady but raised its inflation forecast and lowered its growth projection. Traders anticipate the Fed will wait to assess the impact of Trump’s tariffs. The Fed reaffirmed its forecast for two rate cuts in 2025. However, it lowered its growth projection and raised its inflation outlook. Powell acknowledged tariff risks but downplayed the likelihood of a severe downturn.
• Stocks rallied on Wednesday, rebounding from a recent correction. The market’s gains were fueled by Powell’s optimistic assessment of the U.S. economy.
• The Bank of England and the People’s Bank of China also held rates steady.
• Initial unemployment claims rose slightly but remained below expectations.
• Quarterly earnings from FedEx, Micron, and Nike are in focus. Boeing’s stock rose after its CFO announced easing cash burn. The European Commission ruled that Alphabet and Apple violated antitrust rules. Tencent reported strong fourth-quarter earnings. SoftBank announced it will acquire Ampere Computing.
• European markets declined on global economic uncertainty. Asian markets were mixed following the Fed’s decision. Chinese equities have seen a remarkable rally this year.
• Treasury yields declined as investors assessed the U.S. economy.
• Gold prices remained steady, fueled by safe-haven demand. Oil prices were little changed, balancing supply data and Middle East tensions. Bitcoin extended its gains, tracking the broader rally in risk assets.
• The S&P 500 now sits more than 7% below its record high. Investors remain on edge, bracing for potential volatility beyond the tariff exemption deadline. Traders are pricing in 66 basis points of rate easing by the Fed this year.

U.S. stock futures declined on Thursday, retreating after the previous day’s rally, which was fueled by the Federal Reserve’s commitment to its outlook for two interest rate cuts in 2025. On Wednesday, the central bank kept its benchmark federal funds rate unchanged at 4.25% to 4.5%, aligning with market expectations. However, the Fed also raised its inflation forecast and lowered its economic growth projection, signaling caution despite its dovish stance on rates. Traders widely anticipate that the Fed will hold off on making any moves until it can fully assess the economic impact of President Donald Trump’s tariffs, which have added uncertainty to the outlook. The combination of elevated inflation risks and slower growth projections is keeping investors on edge, even as the central bank maintains its rate cut forecast.

US Market Previous Day:

U.S. stocks rallied on Wednesday, with the S&P 500 rebounding sharply from its recent correction, as the Federal Reserve reaffirmed its forecast for two interest rate cuts in 2025. The Dow Jones Industrial Average surged 383.32 points (0.92%) to close at 41,964.63, while the S&P 500 climbed 1.08% to end at 5,675.29. The Nasdaq Composite outperformed, rising 1.41% to settle at 17,750.79.

(Source: TradingView.com)

The market’s broad gains were fueled by Fed Chair Jerome Powell’s optimistic assessment of the U.S. economy, which appeared to lift cyclical sectors. The financial sector advanced 1.3%, industrials rose 1.5%, and energy stocks jumped 1.9%, reflecting renewed investor confidence in economically sensitive areas. Despite ongoing trade uncertainties, the Fed’s commitment to future rate cuts provided a boost to risk appetite, helping the major averages recover from their recent slump.

US Futures in Red:

• Dow Jones Industrial Average futures remained lower with decline of 0.49%
• S&P 500 futures showed losses of 0.54%
• Nasdaq Composite futures lead the pack with losses of 0.69%.

Key Economic Data/News:

The U.S. Federal Reserve on Wednesday held its key borrowing rate steady at 4.25%-4.5%, in line with market expectations, while signaling its plan for two interest rate cuts in 2025, equivalent to half a percentage point of reductions. However, the Fed lowered its U.S. economic growth projection for next year to 1.7% from the previous 2.1% estimate in December, citing increased trade uncertainties. Simultaneously, it raised its inflation outlook to 2.8% from 2.5%, reflecting rising price pressures. During his press conference, Fed Chair Jerome Powell acknowledged the risks posed by tariffs, though he characterized them as potentially “transitory”. Despite ongoing economic uncertainty from President Donald Trump’s aggressive trade policies, Powell downplayed the likelihood of a severe downturn, stating that while economists warn of recession risks, a major economic slump remains unlikely. Meanwhile, President Trump ramped up pressure on the Fed, urging it via Truth Social to cut interest rates further, using monetary easing as a countermeasure to support his tariff-heavy trade agenda.

Internationally, the Bank of England (BoE) on Thursday held its benchmark interest rate steady at 4.5%, as expected, amid global trade uncertainty and stagnant domestic growth. The BoE’s Monetary Policy Committee voted 8-1 in favor of maintaining the current rate. Similarly, the People’s Bank of China (PBOC) kept its 1-year loan prime rate at 3.1% and its 5-year rate at 3.6%, providing stability for short-term loans and mortgages, respectively. Following the decision, the yuan remained stable, trading at 7.2280 against the U.S. dollar, while Chinese 10-year government bond yields fell by 2 basis points to 1.932%.

On the U.S. labor front, initial unemployment claims rose slightly last week but remained below expectations, signaling continued labor market resilience despite Trump’s push to reduce the federal workforce. First-time filings for the week ending March 15 totaled 223,000, up by just 2,000 from the prior week and below the 225,000 estimate from Dow Jones. The four-week moving average edged up slightly to 227,000, while continuing claims increased by 33,000 to 1.89 million, indicating a modest uptick in longer-term unemployment.

Earnings Season/Company News:

Quarterly earnings results from major companies, including FedEx (NYSE:FDX), Micron Technology (NASDAQ:MU), and Nike (NYSE:NKE), are in focus this week. FedEx’s report is expected to offer insights into the state of the U.S. economy, with analysts at Vital Knowledge highlighting that investors will scrutinize any commentary on potential revenue impacts from economic uncertainty. Meanwhile, Micron’s results could provide a fresh glimpse into AI data center chip demand, though concerns linger over weaker consumer-centric product sales, such as those for personal computers and smartphones. Nike is under pressure, as fears of a tariff-driven downturn in consumer sentiment and rising inflation expectations weigh on its outlook. The sportswear retailer is forecast to post its steepest quarterly revenue drop in nearly five years, according to Reuters.

Boeing’s stock rose on Wednesday after CFO Brian West announced that the company’s cash burn is easing this quarter, with improvements projected to be in the “hundreds of millions” of dollars. Despite ongoing production issues, labor strikes, and safety concerns that caused $14 billion in cash outflows last year, West expressed optimism, stating, “We think we’re off to a good start for the year.” This marks a potential turning point for Boeing, which has not posted an annual profit since 2018.

In regulatory news, the European Commission ruled on Wednesday that Google-parent Alphabet’s Search and Google Play products were in violation of the Digital Markets Act (DMA), an antitrust law aimed at curbing tech competition issues. Separately, the Commission also issued guidance to Apple, urging the tech giant to take concrete steps to meet its interoperability obligations under EU competition rules.

In the tech sector, Tencent reported strong fourth-quarter earnings, with revenue hitting 172.4 billion Chinese yuan ($23.9 billion), 11% higher year over year, beating LSEG’s estimates. The Chinese tech giant’s profit surged 90% from the same period in 2023 to 51.3 billion yuan, well above the 46.03 billion yuan expected. Notably, Tencent’s AI cloud revenue approximately doubled year on year, although the company did not disclose specific figures.

Meanwhile, SoftBank announced it will acquire Ampere Computing in a $6.5 billion deal, as part of its AI infrastructure expansion strategy. Ampere, a Santa Clara-based startup specializing in Arm-based chip design, will continue to operate independently under SoftBank’s ownership. The acquisition complements SoftBank’s broader AI ambitions, including its $3 billion annual investment in OpenAI’s technology and participation in President Trump’s Stargate project, aimed at bolstering AI infrastructure development.

Global Market Trends:

European markets declined on Thursday as global economic uncertainty weighed on investor sentiment, overshadowing monetary policy announcements from the Bank of England (BoE), Swiss National Bank (SNB), and Sweden’s Riksbank. After a muted start, the pan-European Stoxx 600 fell 0.66%, marking a pullback after four consecutive sessions of gains, which had helped it rebound from last week’s 1.22% loss. Germany’s DAX extended its losses, slipping 1.41% after snapping a winning streak on Wednesday. The Stoxx Aerospace and Defense Index also declined, breaking a run of five consecutive weeks of significant gains.

In Asia-Pacific markets, trading was mixed on Thursday following the U.S. Federal Reserve’s decision to keep rates unchanged. China’s central bank, the People’s Bank of China (PBoC), also held its key lending rates steady as it balances efforts to boost growth and stabilize the yuan amid rising trade frictions. The 1-year loan prime rate remained at 3.1%, while the 5-year LPR stayed at 3.6%, where they have been since an October rate cut. As a result, mainland China’s CSI 300 fell 0.88% to close at 3,974.99, while Hong Kong’s Hang Seng Index slid 2.16%, weighed down by investor concerns over China’s economic stability. In contrast, Australia’s S&P/ASX 200 gained 1.16% to close at 7,918.9, while South Korea’s Kospi edged up 0.32% to 2,637.1. However, South Korea’s small-cap Kosdaq tumbled 1.79% to end at 725.15. Japan’s markets were closed for a holiday.

Meanwhile, Chinese equities have seen a remarkable rally this year, with the MSCI China Index surging 19% year-to-date as of March 9, marking its strongest start to a year in history, according to Goldman Sachs. This is a stark contrast to the S&P 500, which recently slipped into correction territory for the first time since 2023. The divergence highlights a swift turnaround in market sentiment, as many investors had previously believed that the U.S. economy was uniquely positioned to weather global economic and political headwinds. In contrast, Chinese stocks, once weighed down by regulatory worries and economic concerns, have rebounded significantly.

Debt Market:

(Source: TradingView.com)

On Thursday, U.S. Treasury yields declined as investors assessed the condition of the U.S. economy following the Federal Reserve’s decision to keep interest rates unchanged. The yield on the benchmark 10-year Treasury note fell by over 7 basis points to 4.182%, while the 2-year Treasury yield decreased by approximately 5 basis points to 3.93%.

Commodities and Other Assets:

Gold prices remained steady on Thursday after briefly touching another record high earlier in the session. The Federal Reserve’s signal of potential interest rate cuts later this year, coupled with geopolitical and economic uncertainty, continued to fuel safe-haven demand for the bullion. However, the U.S. dollar index strengthened, applying downward pressure on precious metal prices. Despite this, ongoing geopolitical tensions and strong central bank demand could support further upside momentum for gold in the near term.

Oil prices were little changed on Thursday, as mixed supply data and Middle East tensions offset the impact of a stronger U.S. dollar. U.S. government data revealed a larger-than-expected drawdown in distillate inventories, including diesel and heating oil, which fell by 2.8 million barrels, significantly outpacing the 300,000-barrel drop forecast in a Reuters poll. However, U.S. crude inventories unexpectedly rose by 1.7 million barrels, surpassing the 512,000-barrel increase predicted by analysts, which capped crude price gains. The dollar’s strength, driven by the Fed’s cautious rate stance amid U.S. tariff uncertainties, also limited oil’s upside potential.

(Source: TradingView.com)

Bitcoin extended its gains on Thursday, tracking the broader rally in risk assets following the Federal Reserve’s decision to maintain its rate cut projections. The absence of drastic policy changes, despite rising economic uncertainty, boosted investor sentiment, fueling further gains in cryptocurrencies. Bitcoin’s advance was part of a broader market rebound, as investors interpreted the Fed’s stance as supportive of riskier assets.

Market Sentiment:

The S&P 500, which briefly dipped into correction territory last week, now sits more than 7% below its record high, reflecting the market’s recent struggles. Investors remain on edge, bracing for potential volatility beyond the upcoming April 2 tariff exemption deadline, as U.S. policy shifts and the possibility of a currency deal—referred to as the Mar-a-Lago accord—could impact the U.S. dollar’s strength.

Meanwhile, traders are pricing in 66 basis points of rate easing by the Federal Reserve this year, implying two 25-basis-point cuts, according to LSEG data. A rate reduction in July is already fully priced in, as markets expect the Fed to maintain a gradual easing trajectory despite rising inflation risks and geopolitical uncertainties.