What is next for the FED? 19/02/2025

HOT stories for today

US market wrap:
 

• The S&P 500 closed at a record high on Tuesday after a last-minute surge sent stocks soaring just before the final bell. Investors appeared unbothered by mounting trade tensions and inflation concerns, focusing on market momentum. The broad market index rose 0.24%,  the Nasdaq Composite edged up 0.07%, while the Dow Jones Industrial Average earned 10 points, or 0.02%. Energy stocks led the rally, climbing 1.9%, with Halliburton and Valero Energy at the forefront. Tech stocks also saw modest gains.
• Meanwhile, President Donald Trump signaled he would likely impose tariffs of 25% or more on imported automobiles, semiconductors, and pharmaceutical products. The White House expects to finalize its trade policy review by April 1, with an official announcement expected the following day. Asked about the potential tariffs on foreign-made cars, Trump stated, “It’ll be in the neighborhood of 25%.” Despite uncertainty on the trade front, Wall Street remained resilient, propelling the stock market to yet another historic milestone.

What is next for the FED?

• The Federal Reserve isn’t rushing to cut interest rates as inflation remains stubbornly high. Investors will analyze Wednesday’s release of January’s FOMC meeting minutes for hints on how long rates may stay unchanged. While inflation has eased from post-pandemic peaks, January’s 3% year-over-year CPI increase exceeded the Fed’s 2% target. With the labor market still strong—unemployment at 4% and wages rising—the Fed has held rates at 4.25%-4.5% since December after previous cuts.
• Fed Chair Jerome Powell reiterated a cautious approach, warning against premature easing, while Trump’s fiscal policies and tariffs add uncertainty. Market expectations for rate cuts remain low—just 2.5% for March and 50-50 odds by June, per CME FedWatch. Still, investors remain optimistic, with the S&P 500 up 4% this year and Treasury yields easing. All eyes are now on the Fed’s next move as inflation risks linger.

 
Stocks on the move:       

• Bumble (BMBL) – Shares of the online dating platform dropped nearly 13% after issuing disappointing first-quarter guidance. The company expects adjusted EBITDA between $60 million and $63 million, with revenue projected between $242 million and $248 million.
• Arista Networks (ANET) – The data center company’s stock declined 4%, despite reporting earings, revenue, and guidance that exceeded Wall Street expectations.
• Toll Brothers (TOL) – The homebuilder’s shares fell 5% after first-quarter revenue came in at $1.86 billion, missing analysts' forecast of $1.91 billion (FactSet).
• Howard Hughes Holdings (HHH) – Shares slid 5% after Bill Ackman raised his takeover bid for the real estate firm, aiming to turn it into a "modern-day" Berkshire Hathaway.

 
Today’s action

• Asia-Pacific stocks traded mixed Wednesday as markets reacted to U.S. President Donald Trump’s proposal for 25% tariffs on autos, semiconductors, and pharmaceuticals. Japan’s Nikkei 225 slipped 0.38%, while the Topix fell 0.31% following the country’s largest trade deficit in two years. However, Japanese business sentiment improved for the second straight month, with the Reuters Tankan index rising to plus 3 in February from plus 2 in January.
• U.S. stock futures were steady after a strong session. Dow futures added 38 points, while S&P 500 and Nasdaq 100 futures edged up 0.09% and 0.13%, respectively. All eyes are on the Fed as the FOMC meeting minutes will be released at 2:00 PM EST. Markets await signals on future policy moves, with Building Permits and Housing Starts data also due in the morning.

Wahtclist: ANET, SMCI, BMBL, TOL, META, NVDA, CVNA

Bitcoin

• Bitcoin tumbled below $94,000 on February 18, 2025, as macroeconomic worries, technical instability, and shifting market sentiment applied downward pressure. The 1.8% drop this week reflects broader crypto weakness, with the global market cap shrinking 2.3% to $3.11 trillion.
• Investor anxiety grew after reports surfaced that the European Union plans to ban unlicensed stablecoins by March 2025, raising liquidity concerns. Meanwhile, Argentina’s meme coin collapse—triggered by a presidential endorsement—shook retail confidence, highlighting the risks of speculative assets. Technically, bitcoin remains in an upward-sloping triangle pattern, signaling consolidation but struggling to break higher. Bitcoin miner reserves fell by 2,000 BTC this week, hinting at declining confidence and mounting sell pressure. If bitcoin slips to $93,500 or $92,500, it could trigger a further drop toward $90,000, with liquidity gaps increasing volatility.
  Watchlist: Bitcoin: 89 000-108 000, Ethereum: 2200-3000, Solana: 180-276

Forex

• EUR/USD trades near 1.0450 in Wednesday’s Asian session, supported by a weaker US dollar. However, concerns over Trump’s proposed 25% tariffs on auto, drug, and chip imports, along with ongoing Russia-Ukraine tensions, could strengthen the greenback as a safe-haven asset, limiting further gains. Meanwhile, the Eurozone ZEW Economic Sentiment Index came in slightly below expectations at 24.2 versus 24.3 forecasted.
• The Japanese yen gains traction after an early session dip, pushing USD/JPY lower to the 151.70-151.65 range heading into European trading. Growing bets on further rate hikes from the Bank of Japan amid persistent inflation continue to support the yen, while divergent Fed-BoJ policy expectations add pressure on the dollar.
  Watchlist: EUR/USD: 1.0200-1.0550, USD/JPY: 153.6-158.80

Basic Materials

• Gold (XAU/USD) rebounded from an intraday dip to $2,924, edging closer to its all-time high during Wednesday’s European session. Investors remain cautious over US President Donald Trump’s tariff plans, which could escalate into a global trade war, fueling demand for the safe-haven metal. Meanwhile, expectations of further Fed rate cuts keep the US dollar under pressure, adding support to gold prices. However, a positive risk sentiment may limit further gains as traders await the FOMC meeting minutes.
• West Texas Intermediate (WTI) crude oil trades around $71.70, holding onto gains in early Asian trading. The price rally continues as supply disruptions in Russia tighten global markets. However, concerns over a potential trade war may cap further upside.
  Watchlist: GOLD 2600-2925, US Oil: 70.00-79.00

Key Economic Events Today:

EST time
08:30 am: USD Building Permits, Housing Starts
02:00 pm: USD FOMC Meeting Minutes

Earnings

BMO (Before the US Market opens)
ADI                Analog Devices Inc.
GRMN           Garmin Ltd.
PHG              Koninklijke Philips NV

AMC (After the US Market closes): CVNA, MFC, TPL

The TEFS Analyst team wishes you a successful day!