Stocks Down Yesterday After Fed Holds Rates Steady, Earnings In Focus Stocks ended moderately lower yesterday. Although, it's worth noting that stocks hit their worst levels before the FOMC announcement. And trimmed those losses afterwards. As expected, the Fed left rates unchanged yesterday at their midpoint of 4.38%. But the outlook is unclear if they continue their pause in March or not (they don't meet in February). Fed Chair, Jerome Powell, at his Press Conference following the announcement said, "with our stance significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance." It was noted that "economic activity has continued to expand at a solid pace," and that "labor market conditions remain solid." But acknowledged that "inflation remains somewhat elevated." Fed Funds traders now have only an 18.0% likelihood that the Fed cuts rate in March. Although, that jumps to 43% for May, and 70.8% for June. But, as the Fed has maintained, they will remain data dependent. And we'll get several more inflation reports, and two more employment reports, before they meet again on March 19. After the close we got earnings from three of the Magnificent 7 stocks. Microsoft posted a positive EPS surprise of 3.86%, and a positive sales surprise of 1.36%. That translated to a quarterly EPS growth rate of 10.2% vs. this time last year, and a sales growth of 12.3%. Cloud revenue missed estimates slightly, but it's hard to complain about a 19% growth rate in that segment. MSFT was down -1.09% in the regular session before earnings, and down another -1.50% in after-hours trade following their report. Tesla reported after the bell as well, posting a negative EPS surprise of -2.67%, and a negative sales surprise of -6.53%. That equated to a quarterly EPS growth rate of 2.82% vs. this time last year, and a sales growth of 2.15%. They were down -2.26% in the regular session before earnings, but were up more than 3% in after-hours following earnings. Meta also announced after the bell and posted a positive EPS surprise of 20.1%, and a positive sales surprise of 3.02%. That showed a quarterly EPS growth rate of 50.5% vs. this time last year, and a sales growth of 20.7%. They guided lower for Q1 and see expenses rising in 2025. But they are still expecting revenue growth of 8%-15% next quarter. They were up 0.32% in the regular session. And were trading up roughly 5% in after-hours. It's worth noting that IBM, which is not part of the Mag 7, was having a solid post-earnings rally, better than the three just mentioned. They posted a positive EPS surprise of 5.09%, although a negative sales surprise of -0.05%. But that came out to a quarterly EPS growth rate of 1.29% vs. this time last year, and a sales growth of 0.98%. They were up 1.32% in the regular session, and more than 8.50% after-hours. Today we'll hear from another 126 companies on deck to report, including another Mag 7 stock, Apple, after close. On the economic report front today we'll get Weekly Jobless Claims, the Pending Homes Sales Index, and the advance estimate for Q4'24 GDP (consensus is for 2.6% vs. Q3's final estimate of 3.1%). At the moment, only the Dow is up for the week. But the others are not so far away where they can't get into the green as well. Next Friday (2/7), we'll get the always important Employment Situation report. But in the meantime, it's all about earnings. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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