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Fed gives relief to stocks, but all is clear there is a way out:

This article was first published in Morning Brief. Get the Morning Brief delivered straight to your inbox every Monday through Friday at 6:30am ET. subscribe

Friday, March 24, 2023

today’s newsletter is by Jared Blickrey, a reporter focused on the markets for Yahoo Finance. follow him on twitter @SPYJared, Read this and more market news on the go yahoo finance app,

Stocks partially recovered Wednesday’s post-Fed losses on Thursday, with the Nasdaq Composite (^IXIC) up 1.0%, while the Russell 2000 (^RUT) settled in the red, down 0.4%.

On the one hand, investors are weighing in on Powell’s flamboyant, inflation-fighting comments. On the other hand, they are indicating that the Fed is In fact Entering wait and see mode – trust it’s job is almost done.

While Powell said the Fed may still have to hike rates further, he clarified by saying the committee was inches away from a no-hike decision on Wednesday.

,[W]e thought [a pause] In the days leading up to the meeting,” he said.

This is by far the closest change in the Fed’s uber-aggressive tone since it began its peak pace of rate hikes a year ago.

But don’t call it “pivot,” and don’t make it obvious to investors quite yet.

Major US indices have been in rally mode since the Fed launched a new liquidity facility last Monday to backstop regional banks. Tech stocks have been the biggest gainers, with the Nasdaq 100 (^NDX) up 7.6%.

Nasdaq 100 Components — 9-Day Returns

Long-term rates crashed throughout these nine trading sessions, which fueled rallies in megacaps such as Amazon (AMZN), Microsoft (MSFT), Tesla (TSLA), Alphabet (GOOGL, GOOG), and META (META) — which All double-digits. Chipmakers Nvidia (NVDA) and Advanced Micro Devices (AMD) gained 19% and 23%, respectively.

Yet the rally was not broad-based. Not surprisingly, the bank panic caused additional damage to the financials. The S&P 500 Select Financial SPDR Fund (XLF) erased its past pandemic gains on Thursday. Meanwhile, the SPDR S&P Regional Banks ETF (KRE) sank to a new crisis low – its lowest level since November 2020.

Putting aside the narrow width of the latest rally for a minute, even the technicals are showing some cracks on the trend trade.

Zooming out on the Nasdaq 100 shows that it’s stuck in a huge trading range over the past year — around 10,500 to 13,000. And it is once again testing that upper range, which it failed as recently as early February.

The catalysts for lower rates and a weaker dollar are also hitting some big levels, with the US 10-year Treasury-note (^Tnx) touching a 2023 low of 3.4%.

Even the biggest bellwether stock of all, Apple, is up against some tough technicals that suggest its rally may need a “pause” before it can materially rally above $165. .

Apple (AAPL) Has Reached Large, Long-Term Levels of Interest

Without a new catalyst and narrative, investors chasing momentum and breakouts are more likely to be punished than rewarded.

Meanwhile, Kenneth Rogoff, the Maurits C. Boas Chair of International Economics at Harvard University, has a message for investors who are betting on the shortfall of the banking crisis.

“If we’re looking at the world as a whole, I believe we’re experiencing the first wave of this, and there are more to come,” Rogoff said on Yahoo Finance Live Thursday.

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