Finanical Insights M

Fed indicates inflation could come down soon fueling risk on rally. Big tech earnings kick off; Facebook soars 19% after hours

Jessica Amir
Market Strategist

Summary:  Fed turns somewhat dovish; triggering a risk-on rally. Fed Chair Jerome Powell said he sees inflation coming down soon, 50% of inflation is ‘disinflationary’, so that’s positive. This suggests policymakers are more confident price pressures peaked and are rolling over and triggered the S&P500 to close at its highest level since Aug 28, after crossing its 200DMA. Facebook kicks off major tech earnings with a bang, sending its shares up 19% after hours on announcing a $40 billion boost to its share back, and guiding for stronger than expected Q1 revenue. Perhaps this is a good sign of what we can expect from Apple, Amazon and Google ahead.

What’s happening in markets

Fed turns somewhat dovish; triggering a risk-on rally 

The Federal Reserve made its eight rate hike. Today it increased its benchmark interest rate by a 0.25% (25bps) as expected. The market was looking for signals the Fed is at the end of its cycle. And the market received indications the end could be in sight.

The Fed statement alluded to hikes slowing, as it said inflation “has eased somewhat but remains elevated.” Later, Fed Chair Jerome Powell said he sees inflation coming down soon. 50% of inflation is ‘disinflationary’ he said. And that’s positive. So this suggests policymakers are getting more confident price pressures peaked and are rolling over.

What to watch; with potential trading and investing ideas

Positive reaction to Fed: Risk on rally till data proves otherwise

The S&P500 reversed its fall, gaining 1.1% to close at its highest level since August 26. From a technical perspective, a golden cross is forming which could trigger quant trader buying. That’s something to watch, which could trigger more upside. The Nasdaq recovered from its earlier loss on Wednesday after the Fed Chair spoke, gaining almost 3% from its low of the day, before ending 2% up.

Facebook kicks off major tech earnings with a bang; Perhaps a good sign of what we can expect from Apple, Amazon and Google

Facebook shares surged 19% after hours, after announcing a $40 billion boost to its share back, as it’s guiding for stronger revenue that expected in Q1 this year, seeing revenue hit $26 to $28.5 billion, with that bulls eye target being more than expected ($27.25 billion). Q4 revenue beat expectations, falling to $32.2 billion, vs $31.7 billion expected. The business sees outgoing expenses dropping more than expected (to $89-95 billion) and lower capital expenditure. Also on the positive, FB’s daily users improved more than the market expected. From a technical perspective Meta shares closed above their 200-day simple moving average. It also appears, a golden cross is forming which could trigger quant trader buying. That’s something to watch, which could trigger more upside.

The Australian share market, the first to the react to the Fed, sees a strong risk on rally in tech

Risk on assets such as tech stocks are charging today, with the sector up 2.8% while gold equities are being bid rising 5-6%, after the gold price rallied 1%. Long term investors will be watching the tech index, given it’s down 30% from its high. Also consider the overall market, the ASX200 has a PE at 15.2 times. Cheaper than Nasdaq’s 57 times earnings. And S&P500’s earnings multiple of over 19 times.


Commodities
, are mixed but strength picked up after Jerome’s more dovish tone

  • Gold (XAUUSD) is up 1.1%; to $1949, remembering gold historically outperformers equites, when the Fed pauses rate hikes. The last time the Fed paused in 2019 the gold price rallied over 60% to a new high.
  • Crude oil (CLG3 & LCOH3) is down 2.6% $76.84. We argue as we've been highlighting and as Ole mentioned on yesterday’s podcast, the fundaments are showing positive signs oil demand has been rising over the last several weeks. However, most of selling in oil, has been from hedge funds closing positions that they opened over the last few months. We argue oil prices are underpinned higher.
  • Copper is down 0.9% and recovered from its earlier selling after the Fed Chair spoke. 


In FX, the 
US dollar index falls to new cycle lows after the Fed Chairs speech

The DXY is now down 11% from its high. The Aussie dollar against the US (AUDUSD) rallied 1.1% to 0.7136. So that’s a pair we continue to watch.



Stay tuned to Saxo's
inspiration page for trading and investing ideas.

For a global look at markets – tune into our Podcast.

 

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.