Stocks Return to All-Time Highs After Fed Statement

The Fed told investors exactly what they wanted to hear on Wednesday, paving the way for a late-day rally that returned two of the major indices to all-time highs.

We got the best of both worlds from Chair Jerome Powell and Friends today. The Committee sharply increased its U.S. growth forecast to 6.5% for 2021 following the $1.9 trillion stimulus package and accelerated vaccine rollout.

However, there are no plans to raise rates this year… or next year… or even the year after that! (Though some officials think a hike in 2023 might be warranted.)

And investors shouldn’t worry too much about rising inflation either. The Committee will give it a long leash. Inflation would have to move well above 2% for an extended period of time before the Fed would consider acting on it.

You could tell investors loved the news because stocks took off in the second half after a rather lethargic open. Also, the 10-year Treasury yield came off its high of the session, though was still up for the day and remains well above 1.6% for a fourth straight session.

The Dow advanced 0.58% (or nearly 190 points) to 33,015.37, which marks its first close above 33K. The S&P improved 0.29% to 3974.12.

These indices both returned to all-time highs after taking a break on Tuesday in the runup to the Fed statement. Nevertheless, the Dow has now reached a new record in five of the last six sessions, while the S&P has done so in four of the last five.

The NASDAQ plunged well over 1% at its worst point today, but recovered on the Fed news. It finished higher by 0.40% (or around 53 points) to 13,525.20. The index is on a three-day winning streak and is now a little more than 4% away from making its own history, marking an impressive recovery after dropping into correction territory a little over a week ago.

Today's Portfolio Highlights:

Home Run Investor: The portfolio is now fully invested with 15 names after today’s addition of LeMaitre Vascular (LMAT), a medical products name that recently pulled back despite beating the Zacks Consensus Estimate in its most recent quarter. In fact, the company has topped our expectations three times and matched once in the past four quarters. Rising earnings estimates have made the stock a Zacks Rank #2 (Buy), while Brian loves to see that operating margins have increased in the past two quarters. The pullback offers a chance to buy LMAT at an attractive entry point. Read the full write-up for more specifics on today’s addition.

Counterstrike: “Stocks were weak all morning, but the Fed stepped in and told the market that the recent worries were unfounded. The Fed reiterated they will stay the course and will not raise rates anytime soon. The key is inflation and the Fed sees the recent movement higher in prices as short-lived.

“All-time highs again! It is pretty remarkable, but the Fed has your back if you are in stocks. Looking to add some positions. We might have missed catching some bottoms, but a lot of stocks have regained technical support and look good to buy.” – Jeremy Mullin

Headline Trader: “Unfortunately, the only thing green in this morning's market were value stocks and the 10-Year Treasury yield, which once again drove high-valuation exposed tech stocks into the red. Then like a St. Patty's Day miracle, the markets flipped a switch following sweet words of sustained easy money policies by Jerome Powell, and tech stocks turned green, providing a nice little pot of gold for long stockholders like ourselves.

“Unsurprisingly, the Federal Reserve has decided to maintain its current Fed Funds rate and bond purchasing regimes, following its two-day March meeting. The Fed's economic indicators point to a moderate economic recovery pace but cited that the most impacted sectors remained weak.

“This maintained the Fed's dovish tone, which some thought might turn hawkish in the wake of recent bond moves. The stock market loved what it saw, specifically the interest-rate-sensitive tech sector, with the Nasdaq 100 making a miraculous recovery into the green (likely to avoid being pinched). The Nasdaq 100 rallied over 1.5% in just 45 minutes following the Fed's press release.” – Daniel Laboe

Have a Good Evening,
Jim Giaquinto