An increasingly transparent Federal Reserve did the expected this afternoon as it concluded its two-day Federal Open Market Committee (FOMC) meeting. That is, it left its federal funds target rate as 2.25%-2.50%. Expectations had been overwhelming that the lead bank would opt to leave rates unchanged.
The Fed also intoned that future monetary moves would be done patiently and with an eye towards how economic conditions were unfolding. That is similar to its earlier indications that future strategy would be data driven. This Friday's report on non-farm payrolls is the kind of report that will be scrutinized carefully as a result.Meanwhile, the Fed vote was unanimous to leave rates unchanged. Our sense is that the central bank will keep this rate level rates for much of 2019, sensing that economic growth now is strong enough to not cut borrowing costs, but also sufficiently muted to keep further rate hikes at bay in the months to come.
As to the stock market, it has been mainly influenced today by earnings, as the Fed decision was widely forecast. And on the earnings front, the market's strong showing--with the Dow Jones Industrial Average now up close to 400 points--largely reflecting the strong issuances from Apple (AAPL – Free Apple Stock Report) and the Boeing Co. (BA – Free Boeing Stock Report). Both stocks are leading the way higher today, with gains of more than 6%.
In sum, the Street has gotten just what it wanted, solid earnings, a benign interest-rate outlook, and solid additional gains in an already potent stock market rally this month.
- Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in AAPL.
