By
Bhushan Akolkar
April 17th, 2024
The biggest winners of Thursday were bank stocks, which saw positive results across the board. Big Tech stocks, meanwhile, fell considerably.
Wells Fargo & Co (NYSE: WFC), JPMorgan Chase & Co (NYSE: JPM) and others tocks rose yesterday, pushed higher by a cautious Fed that said it plans to keep rates near zero even after inflation has exceeded its 2% target level.
This actually means the Fed is now more than ready to accept a higher level of inflation than it generally did in the past. This also means that borrowing rates for households and businesses, for everything starting from auto loans and home mortgages to corporate expansion, will probably stay ultra-low in the next coming years.
The new goal states that “following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”
And, that means that no one was happier than bull investors.
All three indexes went up: the Dow Jones was up 171 points at 4:25 am ET. The S&P 500 jumped 0.51%, while the Nasdaq 100 rose 0.34%; all in response to Fed Chairman Jerome Powell’s yesterday’s speech.
Hugh Briscoe, global fixed income portfolio manager at Goldman Sachs Asset Management, said:
“Investors have been worried that changes to monetary and fiscal policy raise inflation risks in the future – but we think these concerns are overblown. Our view is the Fed’s adoption of average inflation targeting today – which entails periods of above-target inflation when the economy is at full employment to compensate for time spent below target – is likely to raise average inflation over the cycle only modestly.”
CNBC’s Jim Cramer also believes that the buying could continue.
He commented on Powell’s announcement by saying that “this is incredible,” and adding that the Fed is “going to let things run, and [it’s] not going to be a part of the equation until the economy actually does even better than we think.”
Cramer is referencing Powell’s promise not to raise rates until an economic recovery is complete. Other analysts see it as a blessing as well.
Gregory Faranello, head of U.S. rates trading at AmeriVet Securities called Thursday “a pretty meaningful day and added that Powell is saying “we don’t want the job market strong for just Wall Street bankers and people that are doing really well. We want it strong for the people that need it the most in this particular time.’”
Wells Fargo and JPMorgan Stocks among Biggest Winners
The biggest winners of the day were bank stocks, which saw positive results across the board. Big Tech, meanwhile, fell considerably. Especially Facebook Inc (NASDAQ: FB) and Netflix Inc (NASDAQ: NFLX), which dropped 3.5% and 3.9%, respectively. Microsoft Corporation (NASDAQ: MSFT) was the only one gaining 2.5%.
JPMorgan Chase (JPM) stock on the other hand has been trading all over the place since it sold-off in late June and has managed to break out above the 10-day moving average and the stock’s minor bearish trend (represented by the yellow line) yesterday. At the time of writing, the stock was up by 0.73% in premarket trading standing at $103.10.
If it’s true that the tech correction is on its way, the beat-up banks could prosper. JPM’s a leader in the industry and commands the most positive momentum as a result.
Wells Fargo & Company (WFC) stocks were up around 0,65% in premarket trading at 4:47 am ET to hit $24.75. As of August 21, the company came up with an announcement reporting that Mark Chancy has been elected as the company’s board of directors with an immediate effect.
During the last 30 days, WFC shares have fallen by 47.26%. The stock has moved down by 46.28 over the trailing 12 months, falling behind the rest of the market by 118.71%. It has also trailed competitors and similar names by going down by 7.46%.
Be it as it may, this is looking like a great trade for short-term bulls, and, provided that the current trend continues, it’s likely to get even better in the coming trading days.