BofA: Investors pour into bonds, pull back from crypto
Stocks declined on Wednesday after the Fed held rates steady, with Jay Powell signaling during the press conference that he’s comfortable waiting for additional data before considering any cuts. The market is now pricing in only one full rate cut in 2025, as December Fed Funds futures broke out and climbed above 4%.
The dollar index also surged on Wednesday, breaking through resistance at 99 following stronger-than-expected ADP and GDP reports. It now appears poised to move toward 101.
In other news, Meta (NASDAQ:META) reported better-than-expected revenue and provided stronger-than-anticipated revenue guidance. However, the company also noted that both capex and expenses would be higher than previously indicated.
It seems that as long as companies continue delivering above-consensus revenue growth, rising expenses simply don’t matter—a bit surprising, given that wasn’t the market’s reaction when Alphabet (NASDAQ:GOOGL) reported similar news. The earnings call will likely offer more clarity.
Tuesday marked a significant Treasury settlement date, and today will be another. Consequently, the Treasury General Account (TGA) rose by roughly $60 billion, reaching nearly $420 billion. Should the dollar continue strengthening and the TGA keep climbing—as expected—the combined effect will lead to a reduction in overall liquidity.
Copper slumped by 17% on Wednesday after President Trump imposed a 50% tariff on copper, but made an exemption for refined materials from the new tariff. It is a significant move in copper, as the market was obviously caught off guard by the news. I can’t imagine this will be good news for any of the copper producers.
As of Wednesday, we’ve yet to see any meaningful decline in 2-year CPI swap pricing. It will be particularly interesting to monitor how a full trading session at significantly lower copper prices impacts the inflation outlook.