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

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.

, 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 2024 Q3

Sandcastle economics

01 / 07

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
  • The rise of populism: Far-right parties will influence the future

    The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

    Read article
  • Investing in China: Navigating Q1 amid economic challenges

    Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

    Read article

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.