What's moving markets today: March 20, 2019
US stocks shot higher after the Federal Reserve signaled it won't raise interest rates until 2020.
The Dow, which had been down more than 200 points earlier in the day, turned positive on the dovish Fed news.
But bank stocks did not get invited to the party.
The divergence makes sense. Banks are very sensitive to swings in the economy. And the Fed just dimmed its growth forecast. That could raise concerns about the ability of Americans to pay back mortgages and loans -- or at least the demand for more loans.
The other problem is the Fed statement caused the yield curve -- the difference between short and long-term yields -- to flatten. Flatter yield curves make it harder for banks to make money.
It looks like the Federal Reserve got the message that the markets sent it late last year.
The Fed left rates unchanged Wednesday. That was expected. But more importantly for investors, it seems that the central bank now is likely to keep rates on hold for the rest of 2019.
Rates are currently in a range of 2.25% to 2.5%. The Fed says it now expects rates to finish 2019 at about 2.4% -- down from an earlier projection of 2.9%. What's more, Fed chair Jerome Powell & Co. are now indicating that only one more rate hike is likely over the next few years.
The median forecast from Fed members is for rates to go up to just 2.6% in 2020 and remain there in 2021. That's down from the Fed's expectations of 3.1% in December.
First, the good news.
America's CEOs still think the US economy is in solid shape. And they love the corporate tax cuts and the push for fewer regulations by the federal government. That's according to the latest results of a survey conducted by the Business Roundtable.
Still, corporate leaders are not as upbeat as they were a few months ago, largely because they're concerned about trade policies and a global slowdown. The Business Roundtable noted that plans for hiring, capital investment and sales expectations all decreased from the last survey at the end of the fourth quarter. They remain above historical averages though.
JPMorgan Chase (JPM) CEO Jamie Dimon, who is also the chairman of the Business Roundtable, added during a call with reporters that the US government shutdown was a negative for corporate confidence as well.
But Dimon remains upbeat about the economy. He recently said in an interview with CNN's Poppy Harlow that America will be fine in the long run, despite lingering concerns about a trade war between the US and China.
The Dow dropped 200 points following President Trump's new comments that tariffs on China could be kept on for a "substantial period of time."
"Not what we wanted to hear," Peter Boockvar, the chief investment officer at Bleakley Advisory Group, wrote in a note to clients
Trump added that a trade deal between the two countries is progressing. He added: "We have our top representatives going there this weekend to further the deal."
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It looks like the markets are eagerly awaiting the Fed's interest rate decision coming at 2:00 pm ET.
Here's a check of some winners and losers:
- Viacom (VIAB) is down nearly 6%. The company warned that AT&T (T), which owns CNN, could drop Viacom's channels Friday if a renewal deal isn't reached.
- General Mills (GIS) is up 4% after it posted a positive earnings report. It's now up 26% for the year.
- FedEx (FDX) is down 5% after warning of a rough few months ahead.
Chase (JPM) has its eye on a new type of customer.
The bank said Wednesday that it's launching checkless accounts for a flat fee of $4.95 per month.
The accounts will not charge overdraft fees and don't require account minimums.
Customers will still have access to Chase's mobile app, ATMs and branches, and will receive a debit card.
The play: Chase wants to reach lower-income populations who may not have qualified for banking services in the past. And ditching overdraft fees could help its appeal.
FedEx (FDX) shares are down 6% in early trading:
- The delivery company had a disappointing earnings report on Tuesday.
- Its net income in the most recent quarter dropped 20% compared to a year earlier.
- FedEx also warned that its earnings will be lower for the full fiscal year, which ends in May.
- The stock is on track to have its worst day since December 19, 2018, when it dropped 12%.
Wall Street is starting Fed Day on a gloomy note.
Wall Street will shift its attention to the Federal Reserve, which is scheduled to announce its policy decision and hold a press conference on Wednesday afternoon. Fed chief Jerome Powell is widely expected to stress that the central bank will be patient before making its next move.
The local TV media conglomerate announced in December it was buying Tribune Media (TRCO) and needed to divest several stations to comply with FCC ownership rules and gain the Department of Justice's approval for its $4.1 billion deal.
The purchase of WPIX-TV, New York City's CW affiliate, gives Scripps an entry into the nation's biggest TV market. Here is the full list of stations each will acquire.