Fed's Move Today: What to Expect? 29/01/2025

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Fed's Move Today: What to Expect?

• The Federal Reserve meets this week for the first time in Donald Trump’s second term, but officials are expected to keep rates steady at 4.25%-4.5% despite his calls for immediate rate cuts. Market pricing suggests near-total certainty that no changes will be made.
• “It’s the right call to stay steady,” said former Dallas Fed President Robert Kaplan, citing inflation concerns and economic shifts. While Trump urges swift action, the Fed remains cautious, waiting to assess the impact of his policies on tariffs, regulations, and immigration. Fed Chair Jerome Powell, who had a strained relationship with Trump in his first term, will likely address the president’s demands in a press conference Wednesday. However, with no expected updated economic projections, investors will be left parsing the Fed’s statement for policy signals.

 
 
 
Stocks on the move:       

• Starbucks (SBUX): The coffee giant climbed over 2% following stronger-than-anticipated quarterly earnings. According to LSEG, Starbucks reported fiscal first-quarter earnings of 69 cents per share on $9.40 billion in revenue, surpassing analyst estimates of 67 cents per share and $9.31 billion in revenue. However, same-store sales declined for the fourth consecutive quarter.
• F5 (FFIV): Shares of the application security firm soared 12% after issuing an optimistic revenue forecast for the second quarter. F5 expects revenue to fall between $705 million and $725 million, exceeding the $702.7 million projection from analysts surveyed by FactSet.
• LendingClub (LC): The financial services provider tumbled more than 17% as its fourth-quarter provisions for credit losses exceeded analyst expectations.
• Qorvo (QRVO): The semiconductor manufacturer jumped 12% after delivering a strong fourth-quarter outlook. The company projected adjusted earnings per share of $1, beating the consensus estimate of 86 cents per share.

 
 
Today’s action

• Asian stocks edged higher on Wednesday, following Wall Street’s overnight rebound, while several markets in the region remained closed for the Lunar New Year holiday. Japan’s Nikkei 225 rose 0.76%, and the Topix gained 0.6%, recovering from losses in the previous session. Minutes from the Bank of Japan’s December meeting revealed discussions on neutral interest rates and future monetary policy adjustments. With inflation staying above the 2% target and wage hikes spreading amid labor shortages, policymakers are considering further increases in borrowing costs. Last week, the BOJ raised rates by 25 basis points to 0.5%, the highest since 2008.
• In the U.S., stock futures remained near the flatline on Tuesday night ahead of the Federal Reserve’s first interest rate decision in 2025. Futures linked to the Dow Jones Industrial Average dipped 11 points (0.02%), Nasdaq 100 futures edged up 0.06%, and S&P 500 futures were unchanged. Investors will closely watch Fed Chair Jerome Powell’s first press conference under President Donald Trump’s second term. The two have had a tense relationship, and Trump has already stated he will “demand that interest rates drop immediately.” In after-hours trading, big tech stocks are in focus, with Microsoft (MSFT), Meta Platforms (META), and Tesla (TSLA) set to release earnings.

                                              Wahtclist: SBUX, MSFT, META, TSLA, ASML, DHR, ADP


Bitcoin

• A shake-up in global markets, triggered by Chinese artificial intelligence startup DeepSeek, has injected fresh turbulence into digital assets, raising concerns about crypto’s trajectory after last year’s surge. Bitcoin traded at $102,316 on Tuesday in New York, recovering some losses after a 3% decline in the previous session that coincided with a selloff in the Nasdaq 100 Index. Other tokens, including Ether and Solana, also pared earlier declines.
• DeepSeek’s rapid ascent has intensified fears over escalating AI competition from China, casting doubt on the lofty valuations of U.S. tech giants that thrive on innovation leadership. For crypto, the concern is that such uncertainty could dampen broader speculative enthusiasm, counteracting the optimism fueled by President Donald Trump’s executive order backing pro-crypto regulations. “While crypto markets remain closely correlated with technology sector sentiment, periods of heightened volatility often prove temporary,” said Rick Maeda, a research analyst at Presto Research. He noted that the initial selloff "may have been excessive."
  Watchlist: Bitcoin: 89 000-108 000, Ethereum: 3000-3800, Solana: 160-220

Forex

• The Japanese yen recovers some ground after Tuesday’s steep drop, while USD bulls hold back, awaiting the Fed’s rate decision. Positive market sentiment may limit JPY gains and support USD/JPY. The yen remains strong against the US dollar ahead of the European session, fueled by expectations of further Bank of Japan (BoJ) rate hikes. A decline in US Treasury yields, driven by prospects of Fed easing, narrows the US-Japan yield gap, benefiting the lower-yielding JPY. Meanwhile, renewed USD selling pushes USD/JPY toward the 155.00 level. 
  EUR/USD struggles ahead of the Fed’s policy decision amid rising risk aversion. The CME FedWatch tool indicates near certainty that the Fed will keep rates between 4.25%-4.50%. At the same time, traders anticipate a 25 bps rate cut from the European Central Bank on Thursday. EUR/USD stabilizes near 1.0440 in early Wednesday trading but remains vulnerable to further downside pressure.
  Watchlist: EUR/USD: 1.0200-1.0550, USD/JPY: 155-158.50

Basic Materials

• West Texas Intermediate (WTI) crude oil prices edged lower during the Asian session on Wednesday, giving up part of the previous day's modest recovery from a nearly three-week low. The commodity hovered around $71.00 per barrel, down more than 0.25% for the day, as concerns over a potential global trade war dampened demand outlook. However, losses remained limited after US inventory data showed a smaller-than-expected rise in stockpiles.
• Meanwhile, gold prices consolidated within a narrow range, struggling to build on the previous session’s gains. The precious metal traded with a slight negative bias, hovering just above $2,760. A broadly positive risk sentiment in equity markets pressured demand for safe-haven assets, while a decline in US Treasury bond yields provided some support. Investors remained cautious, avoiding strong directional bets ahead of the Federal Reserve’s policy announcement.
  Watchlist: GOLD 2600-2750, US Oil: 70.00-79.00

Key Economic Events Today:

EST time

08:30 am: USD Good Trade Balance
08:30 am: USD Prelim Wholesale Inventories
10:30 am: USD Crude Oil Inventories
10:30 am: CAD BOC Press Conference
02:00 pm: USD Federal Funds Rate
02:30 pm: USD FOMC Press Conference

Earnings:

BMO (Before the US Market opens)

ASML       ASML Holding N.V.  
TMUS       T-Mobile US
DHR         Danaher Corp.
ADP          Automatic Data Processing
MSCI        MSCI Inc.

AMC (After the US Market closes): MSFT, META, TSLA, IBM, NOW

The TEFS Analyst team wishes you a successful day!