Powell Pushes Back on March Cut; US Vows More Mideast Strikes

Federal Reserve Chair Jerome Powell indicated in an interview on 60 Minutes that it's unlikely for the Federal Reserve to cut interest rates at their March meeting, as they are waiting for more economic data to confirm that inflation is headed down to their desired 2%. Meanwhile, global leaders are gathering in Doha for the Carter Economic Forum from May 14th to 16th, and tensions continue to rise in the Middle East as the US and Iran exchange threats, with the US promising further strikes on Iranian forces and proxies. In Washington, senators have reached a deal to provide more funds for border security and aid for Ukraine, but there are still some hurdles preventing its passage in the House.

Former President Donald Trump has indicated he may impose new tariffs on Chinese imports if he's re-elected, adding to concerns for investors in Chinese assets. Trump also suggested he might not approve a deal allowing Japan to buy US Steel. In Hong Kong, Chinese policymakers are working to stabilize the equity market by guiding more funds into it and cracking down on illegal activities. Elsewhere, Boeing continues to face manufacturing issues with its 737 MAX Jet, leading to FAA scrutiny and production caps. In the entertainment world, Taylor Swift broke a Grammy record with her win for album of the year. And Harvard University has added former Merck CEO Ken Frazier and KKR co-CEO Joseph Bey to its governing board as it deals with criticism over its handling of on-campus antisemitism.

The ongoing impeachment process against Homeland Security Secretary Alejandro Mayorkas by Republican-led committees is being pursued based on the determination that he broke the law, according to House Speaker Mike Johnson. This is in contrast to the Democratic-backed impeachment of former President Trump, which was viewed as politically motivated. Nikki Haley, a potential Republican presidential candidate, attacked her main rival, Donald Trump, during a campaign event in South Carolina, expressing doubts about his ability to win a general election. In the Democratic primary, President Biden secured a decisive victory in South Carolina, while California Governor Gavin Newsom declared a state of emergency in eight Southern California counties due to potential flooding and landslides caused by heavy rains and high winds. In sports news, East Rutherford, New Jersey, was selected to host the championship game of the 2026 World Cup Soccer, despite Dallas having a larger stadium. The first game in the United States will be held in Los Angeles, and Las Vegas will host the Super Bowl for the first time. The Chiefs and 49ers arrived in Las Vegas for the upcoming Super Bowl, and Patrick Mahomes, the Chiefs' quarterback, may face media questions about his father, who recently received a DWI in Texas.

Despite the excitement surrounding potential interest rate cuts, the Federal Reserve is not rushing to make a decision. Fed Chair Jerome Powell reiterated in an interview on 60 Minutes that the Fed wants to see more evidence that inflation is moving down sustainably before making a move. This message aligns with the Fed's previous stance and is not a new development. However, it's important to note that there was a lot of excitement about rate cuts in 2024 baked into the stock market during the monster 40-day rally in the fourth quarter of 2022. The Fed's stance could have implications for the stock market, particularly for those sectors that have been benefiting from the rate cut expectations. Meanwhile, in the world of sports, Eli Manning coached the NFC to victory in the Pro Bowl, and the first PGA event since 2016 was held due to rain. Wyndham Clark won his first victory since the US Open last year, and various college basketball teams battled for first place in their conferences. The show "The Deal" explores deal making across sports, media, and entertainment, and can be listened to wherever podcasts are available.

Despite concerning sentiment indicators, the overall constructive view on the stock market for the year remains intact. However, there are signs of potential froth in the market, as indicated by high buy-side positioning in U.S. Equity futures and net bullishness in the AAII survey. A pullback of 5-10% is expected, but anything beyond that would be considered an outlier and a sign of economic concern. Companies reporting earnings are expressing varying outlooks, with some expressing optimism and others highlighting uncertainty and geopolitical risks. The earnings season is in full swing, and it's important to stay informed and adapt to the evolving market conditions.

Despite a busy reporting season, investor reactions to earnings have been muted, and the focus is now on understanding cost margins and adjusting expectations. The market is working through slight number adjustments and will move on once more realistic expectations are set. The overall sentiment is that this reporting season is just one to get through before the market can continue its momentum. Additionally, from the world of business and entertainment, the importance of effective deal making was emphasized in a conversation on the podcast "The Deal." The complexities of sports, media, and entertainment deals go beyond just bringing together big names, and the show explores these intricacies with business icons.