The Fed May Be Finished Raising Rates, Facebook Soars

The Fed turned more dovish, shocker. It would seem to me the tightening cycle is over. Here was your essential line from the FOMC statement in my opinion:

In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.

The Fed would seem to now be focused on inflation, and as long as that stay low, then rates are finished rising. With oil and most major commodities down it seems unlikely that inflation will increase substantially anytime soon. With that, I think the Fed is likely finished raising rates for some time.

Confirmation

The bond and FX market would seem to agree with my assessment. 10-year rates fell sharply after the news, as did 2-year rates.

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yields

The dollar fell sharply too, as it should.

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dollar

S&P 500 (SPX)

Stocks rose sharply as a result of the more dovish Fed with the S&P jumping 1.6%. For now, resistance on the S&P is at 2,690 and investors tried to break that resistance level, but failed on the first attempt. I expect that it will be broken, and that will likely result in a rally to 2,800.

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spx, sp500

Tesla (TSLA)

Tesla reported results tonight, and they look pretty good, better than the disaster that some would have had you think after the company laid off workers.Nothing stands out to me except the company had cash flow of $750 million and has enough cash on hand to deal with the March debt payment.The chart is unchanged from yesterday, so I think $330 is still in play.

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tesla

Facebook (FB)

Facebook is surging after they beat estimates, but the most impressive number is that ARPU in the US & Canada at almost $35! That is a massive increase from last year! There was even a big jump in Europe.

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Disclosure: Michael Kramer and the clients of Mott Capital own Apple, Microsoft, Tesla

Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's ...

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Moon Kil Woong 8 months ago Contributor's comment

Most of these are just bouncing after the recent downturn. I don't see them as long term trends and would be worried getting in now. I go with stronger longer term vibrant companies with consistent growth and no bad trends and press surrounding them. Microsoft is ok and AMD I'd be careful because the chip sector has been in a rough patch.