Fed Turbo-Charges Stocks
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What is the main topic discussed in this episode?
With your money briefing, I'm Charlie Turner in New York for The Wall Street Journal.
How did U.S. major stock averages perform last Friday and for the week?
The major U.S. averages ended mixed Friday, capping a strong week.
Which specific market moves and index changes drove the weekly performance?
Running down the numbers, the Dow Jones Industrial Average closed up 64 points at 25,063. The Nasdaq Composite fell 17 points, while the S&P 500 ended two points higher. For the week, the S&P rose 1.6 percent, the Dow was up 1.3 percent, and the Nasdaq booked a gain of 1.4 percent. We're joined by Cori Dreebush, markets reporter for The Wall Street Journal. Cori, as I said, a mixed day for Friday. A great number on January job growth, 304,000 on the one hand. On the other hand, Amazon.com's outlook was weak.
Yes, it's funny.
What did Wall Street Journal reporter Corri Driebusch say about Amazon's earnings and guidance?
A lot of companies in earnings season this quarter have been down. Just barely beating, but beating very lowered expectations. But the market has been watching for guidance. And Amazon's kind of cautioned in their report that spending is likely to increase this year and also that some government restrictions in India could weaken its revenue there. So that coupled with, I believe, that its revenue growth has just been slowing, even though it's still growing. got some investors a little worried. So they sold off that stock pretty brutally today.
Do earnings generally have investors in an upbeat mood, or are they still worried about it? It seems like earnings have had a fairly strong quarter.
Yeah, I think it's important to note that they're better than feared. Earnings expectations had come down so much in recent months, but also recent weeks, just leading up to the start of earnings season.
Are corporate earnings beating expectations or merely beating lowered forecasts?
There was very lowered expectations, so they didn't need to do much to beat them. It's not that we're having the super strong returns. One thing to note, the companies in the S&P 500 are on track with about half of the companies reported to post year-over-year earnings growth of 12%, which on the one hand is the fifth straight quarter of double-digit earnings growth. On the other hand, it's the first time that growth has fallen below 20% since the fourth quarter of 2017. So it's sort of good news, but not great news.
But it was a positive week, and the catalyst was the Fed's policy statement, Chairman Jerome Powell's press conference, both of which signaled that interest rate hikes would be coming to an end.
How did the Fed's patient stance on rate hikes influence January's stock rally?
Yes. So we saw quite a few good news items. We saw this strong jobs report on Friday, which had a lot of jobs were added, along with a tick up in wages. And that supported this newfound optimism that has kind of washed over the stock market just in January and now this one day of February. As many of our listeners will remember, in December, there were quite a few fears that there was an economic slowdown going down, going on, that maybe we could be heading closer to a recession, and that the Federal Reserve was just barreling ahead with so many interest rate raises, they were out of touch. et cetera, et cetera. Well, how much one month has changed, all the data shows the economy may be slowing, but it's still growing.
And the Fed has really come out very strongly to say they're not going to be rushing to raise interest rates.
What risks do investors see ahead, including U.S.-China trade talks and a potential government shutdown?
And we saw that this week with Chairman Powell's remarks that they're going to be patient. And it was very comforting to stock market investors and traders.
How do you view the Fed's statement that the central bank would be patient with future rate hikes, followed by a strong jobs report? Do observers think that the Fed might have been a bit quick on the draw, signaling an end to rate hikes? Is there any of that in there?
Yeah. I mean, his comments this week said the case for raising rates has weakened somewhat, which, as you mentioned, juxtaposition with this big jobs report is maybe the Fed paid too much attention to the stock market versus the data. And that's been a common criticism of the Fed going back the past decade since the financial crisis. But it's important to note in talking to a lot of economists and analysts and strategists is that even as January's employment numbers look good, the Labor Department did revise its figures for December lower.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:10
2
How did U.S. major stock averages perform last Friday and for the week?
0:10–0:14
3
Which specific market moves and index changes drove the weekly performance?
0:14–0:51
4
What did Wall Street Journal reporter Corri Driebusch say about Amazon's earnings and guidance?
0:51–1:52
5
Are corporate earnings beating expectations or merely beating lowered forecasts?
1:52–2:35
6
How did the Fed's patient stance on rate hikes influence January's stock rally?
2:35–3:35
7
What risks do investors see ahead, including U.S.-China trade talks and a potential government shutdown?
3:35–5:59
8
Which companies and economic reports should investors watch in the coming week?
5:59–8:25
Speakers
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