Market Recap – Wednesday, March 19, 2025
Stocks Rally on Dovish Fed Takeaways
U.S. equities closed higher, with the S&P 500 (+1.08%), Dow (+0.92%), Nasdaq (+1.41%), and Russell 2000 (+1.57%) all gaining ground. Growth and momentum stocks led the advance, with big tech rebounding after recent underperformance. Tesla (+4.7%) and Nvidia (+3.3%) were standouts, while airlines, travel, software, banks, credit cards, homebuilders, payments, and off-price retail (Ollie’s +9.0%) also outperformed. Laggards included P&C insurers, managed care, pharma, food/beverage, and China tech.
Treasuries rallied with curve steepening, reflecting dovish signals from the Fed. The dollar rose 0.3%, gold was little changed, Bitcoin jumped 3.9%, and WTI crude edged up 0.2%.
Federal Reserve Holds Rates, Signals Caution
The Fed left interest rates unchanged at 4.25-4.50%, as expected, while reducing the pace of quantitative tightening (QT) starting in April—a move seen as dovish. The Summary of Economic Projections (SEP) kept the 2025 median dot plot unchanged, signaling 50 basis points of rate cuts this year, though growth forecasts were downgraded and inflation projections revised higher.
Fed Chair Powell acknowledged that tariffs are driving inflation expectations higher, but suggested the impact would likely be transitory. Markets reacted positively, interpreting the QT slowdown and Fed’s cautious tone as less restrictive policy going forward.
Corporate Highlights: Tesla Secures Key Approval, Boeing Guides Higher
Tesla (+4.7%) secured California approval to begin carrying passengers, bringing it closer to launching a ride-hailing service.
Boeing (+6.8%) CFO said Q1 free cash flow could be several hundred million dollars better than expected.
Google (-1.5%) confirmed its $30B+ acquisition of Wiz, expanding its cybersecurity presence.
Affirm (+9.2%) rebounded after a Compass Point upgrade, arguing recent declines were overdone.
Signet Jewelers (+17.3%) surged on better-than-feared Q4 results and a strong Q1 outlook.
Intel (-6.9%) declined after reports that TSMC’s board has not discussed acquiring its foundry division.
General Mills (-2.1%) cut its FY25 revenue and EPS outlook, citing inventory headwinds and tariff concerns.
Williams-Sonoma (-3.5%) lowered its FY26 EPS forecast, despite better-than-expected Q4 earnings.
HealthEquity (-17.1%) tumbled on fraud-related expenses impacting profitability.
Here’s Our Take
Fed’s Shift on QT is a Dovish Signal – The Fed’s decision to slow balance sheet runoff suggests a less restrictive stance, which could support risk assets in the coming months.
Tariff Uncertainty Remains a Risk – Powell’s comments on transitory inflation from tariffs indicate policy risks still loom, particularly with the April 2 reciprocal tariff decision approaching.
Big Tech and Growth Stocks Rebounding – After weeks of underperformance, momentum and growth names showed strength, but further volatility is likely.
Consumer and Retail Under Scrutiny – Companies like General Mills and Williams-Sonoma pointed to tariff-related pressures and slower discretionary spending, adding to concerns about consumer resilience.
With the Fed balancing inflation concerns with growth risks, investors should monitor economic data and trade policy developments closely while maintaining selective exposure to quality growth and defensive sectors.