Inflation dominates Powell’s remarks, pressures stocks. Plus, big earnings tonight
Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch, an actionable afternoon update just in time for the final hour of trading on Wall Street. Stocks fell on Wednesday, losing most of this week’s gains. The S&P 500 index fell to the lowest levels of the session after the Fed kept interest rates steady. This was expected. Fed Chairman Jerome Powell said inflation was not falling as quickly as hoped, putting pressure on stocks. Powell expects the increase in oil prices due to the Iran war to increase inflation in the near term. Warmer-than-expected wholesale inflation data and West Texas Intermediate crude briefly rising above $99 a barrel on Wednesday certainly underlined Powell’s stance. Brent international crude reached almost $110 after Iran warned of retaliatory strikes on its energy assets in the Persian Gulf following an attack on one of its gas fields. While the Fed predicts an interest rate cut this year, Powell said that this may change depending on the long-term inflation picture. Powell’s term as central bank governor ends in May. President Donald Trump has been vocal about the need for the Fed to lower interest rates even further. Trump chose former Fed Governor Kevin Warsh to replace Powell. Warsh’s nomination still needs Senate confirmation. Powell said he plans to stay on as Fed chairman until Warsh is confirmed. The Federal Open Markets Committee ended its two-day March meeting on Wednesday by keeping interest rates steady in its target range of 3.5% to 3.75%. The vote of the central bank’s policymaking group was 11 to 1, with Fed Governor Stephen Miran opting to cut interest rates by 25 basis points. The result was not a surprise. Interest rate cut expectations dropped significantly last month due to concerns that rising oil prices would lead to a rise in inflation. The FOMC also updated its Economic Projections Summary for the first time since December. This report includes “dot plots” that show where individual policymakers expect interest rates to go in the future. The market often puts too much meaning into this projection because policies change with the data. However, as we mentioned before, committee members expect only one interest rate cut this year for now. The Fed cut interest rates three times at the end of last year and three times at the end of 2024. The Fed currently finds itself in a bind as it deals with risks of higher inflation from war and tariffs, as well as downside risks to the labor market from AI replacing jobs. For now, Powell said the committee is “on the edge of restrictive and not restrictive” as it balances its dual mandates to promote maximum employment and stable prices. Following the closing bell on Wednesday is a major earnings release that could have implications for AI development and the broader tech industry. Micron is reporting quarterly results, and what the company says about memory market conditions (demand and supply constraints) will help investors better understand how tight the DRAM market is expected to continue. DRAM is a key component in semiconductor chips, and its rising prices are creating cost pressures for hardware companies such as Apple and Cisco Systems. Five Below also reports Wednesday evening. Before the opening bell on Thursday, Darden Restaurants, the parent company of Alibaba, Accenture and Olive Garden, reported earnings. Second, it can give an idea of whether consumer spending patterns have changed since the start of the war. (See here for a complete list of stocks in Jim Cramer’s Charitable Trust.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
