March 20, 2025

After an awful day on Tuesday, the market started out higher and was up by 27 S&P points just before the Fed interest rate announcement, from which it got to an astounding gain of 90 before cooling off to end with a 60 point advance to 5675 as it was led for a change by the large technology stocks and the financials.

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The Dow also followed the same pattern, with a gain at Fed time turning into a closing advance of 383 to 41,964 as financials did well, along with BA, CVX, IBM, MSFT and V.

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The Nasdaq also made a nice gain of 246 to 17,750 as even beaten down TSLA and MSFT had the nerve to advance, along with other large technology stocks.

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The Russell 2000 Index of small stocks also did well for 32 points to 2082 on gains in financials and the VIX really got clobbered down to 19.9 on the strong gains in stocks.

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To no one’s surprise the Fed did exactly what everyone thought it would do, namely keep the federal funds rate at 4.25% to 4.5% and said that the economy still looks healthy enough to keep interest rates where they are.

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The rally followed weeks of sharp and scary swings for the U.S. stock market. Uncertainty is high about how much pain the President will allow the economy to endure in order to remake the system. He has said that he wants manufacturing jobs back in the United States and far fewer people working for the federal government.

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Trump’s barrage of announcements on tariffs and other policies have created so much uncertainty that economists worry U.S. businesses and households may freeze and pull back on their spending.

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Chair Jerome Powell acknowledged the rising pessimism among U.S. consumers and companies shown by recent surveys, but he also pointed to data showing the economy is solid at the moment, such as a relatively low unemployment rate. He said it is possible to have periods where “people say downbeat things about the economy and then go out and buy a new car.”

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“Given where we are, we think our policy is in a good place to react to what comes, and we think that the right thing to do is to wait here for greater clarity about what the economy’s doing,” Powell said.

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The Fed has been holding interest rates steady this year, after cutting them sharply through the end of last year. While lower rates can help give the economy a boost, they can also push inflation upward.

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Fed officials indicated they’re still penciling in two cuts to the federal funds rate by the end of this year, just as they were forecasting at the end of last year. But they are also seeing weaker growth for the U.S. economy and higher inflation than they were before. More than anything, the message from the Fed seemed to be how much uncertainty is clouding everything.

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“What would you write down?” Powell said when asked about the continued forecasts for two cuts to rates this year. “It’s really hard to know how this is going to work out.”

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Powell, though, pushed back against fears about what’s called “ stagflation,” where the economy stagnates but inflation remains high. The Fed doesn’t have good tools to fix such a toxic combination. The last time the U.S. economy suffered through it was in the 1970s, and Powell said, “I wouldn’t say we’re in a situation that’s not comparable to that.”

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Stocks also got a boost from lower Treasury yields in the bond market. When Treasurys are paying investors less in interest, they can encourage investors to pay higher prices for stocks.

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The yield on the 10-year Treasury dropped to 4.24% from 4.31% just before the Fed announced its decision. The Fed said it will also begin paring the monthly reductions of its trove of Treasurys beginning in April. Such a move can help keep longer-term yields lower than they would otherwise be.

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Powell repeated several times that the move was more technical than a hint about coming changes in policy. “It isn’t sending a signal in any hidden way,” he said.

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Yields for shorter-term Treasurys also fell as traders built up expectations for the Fed to deliver as many as three cuts to rates by the end of this year. They’re betting on a 55% chance of that, up from 44% a day earlier, according to data from CME Group.

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NVDA helped support the market after rising 1.8% to cut its loss for the year so far to 12.5%. It had hosted an event on Tuesday where it largely “did a nice job laying out the roadmap” and fighting back against speculation the artificial-intelligence industry is seeing a slowdown in demand for computing power.

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TSLA rose by 5%, following two straight losses of roughly 5%. It is still down by 42% for 2025 so far, struggling on worries that customers are turned off by CEO Elon Musk’s leading efforts to slash spending by the U.S. government.

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GSI despite reporting a stronger profit for the latest quarter than analysts expected, but the cereal and snack maker’s revenue fell short of analysts’ targets, in part because of a slowdown in sales for snacks. It also cut forecasts for revenue and profit over its full fiscal year, partly because it expects “macroeconomic uncertainty” to continue to affect its customers.

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Earnings this week include: yesterday – GIS, JLL lower, today – FIVE, JBL higher and DRI lower; tonight - FDS, FDX, LEN, NKE, MU.

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Economic reports will see: yesterday  – F.O.M.C interest rate decision at which they are expected to keep the rate at 4.25% to 4.5%. They will announce their latest update for Summary of Economic Projections which will be either two or now investors are looking for the possibility of three due to the current uncertainty going on in the markets (see above); today - weekly jobless claims at 223,000 and February L.E.I. down by 0.3%