MW Here's the real reason stocks rose after a do-nothing meeting, says this ex-New York Fed trader

By Steve Goldstein

Trump may be correct to again call for lower interest rates, says Joseph Wang

There was some debate after the Federal Reserve's press conference over whether Chair Jerome Powell was trying to convey a hawkish message or a dovish one.

But, really, the message he was trying to convey was none at all. The Fed's going to wait and see and for now ignore a plunge in soft data - surveys of consumers and businesses - until, or unless, the hard data confirms it.

Joseph Wang, the self-proclaimed "Fedguy" who was a senior trader at the New York Fed, explains it this way in a video he posted after Powell spoke.

"A lot of people say they are pretty downbeat in surveys, and then they turn around and they go buy a new car," says Wang. "So he's saying, what we've noticed in the past is that the soft data, the survey data really has not been very accurate in predicting the hard data ... So at the moment it just seems like he's not really concerned about the upward shift in consumer inflation expectations or the downbeat consumer surveys," he said.

So why did stocks see such a strong reaction to a meeting where the Fed didn't change rates, didn't change rate forecasts and didn't really tip its hand where it was going?

Wang, a newsletter writer who just started an advisory firm called Monetary Macro, said it was the decision by the Fed to taper its bond selling program, called quantitative tightening, that sparked the market.

The Fed's actions are tied to the debt ceiling, which has to get raised by August. As the debt ceiling approaches, the Treasury spends down the money it has in the Treasury general account, which right now has over $500 billion in it. That money goes into the banking sector. So far, no problem.

"The problem arises when finally the debt ceiling is resolved, then what happens is that the government suddenly issues a whole bunch of debt in a short window to try to rebuild the TGA," explains Wang. "That movement is going to represent a huge sucking sound of liquidity out of the banking sector into the TGA."

With bank reserve levels already low, the concern is that a huge movement of a few hundred billion dollars out of the commercial bank accounts might lead to friction. So the Fed tapered QT from $25 billion a month to $5 billion a month, which Wang says was a "huge" move.

So that's what the stock market and importantly the bond market was reacting to. Wang also pointed out that a lifting of options hedges heading into the meeting - "nothing big happened, so you take those hedges off" - also provided a boost.

Admittedly, those are all short-term effects. Now, he says, it's down to what the White House says and does with respect to tariffs.

On social media, Wang also commented on President Donald Trump's message calling for rate cuts as the tariffs gets implemented. He pointed out that in his first term, Trump had insisted rates were too high. "Fed ignored him, equities tanked, and then the Fed finally pivoted. Feels like the same story today," he said.

The market

U.S. stock futures (ES00) (NQ00) fell after Wednesday's strong rise for the S&P 500 SPX. Gold futures (GC00) hit another record.

   Key asset performance                                                Last       5d     1m       YTD     1y 
   S&P 500                                                              5675.29    1.36%  -7.63%   -3.51%  8.63% 
   Nasdaq Composite                                                     17,750.79  0.58%  -11.49%  -8.08%  8.44% 
   10-year Treasury                                                     4.246      -2.70  -26.50   -33.00  -1.80 
   Gold                                                                 3048.3     1.57%  3.14%    15.50%  39.61% 
   Oil                                                                  67.48      1.08%  -7.03%   -6.11%  -16.51% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Weekly jobless claims, the Philadelphia Fed manufacturing survey and existing home sales data are set for release.

PDD Holdings $(PDD)$, Accenture $(ACN)$, and after the close, FedEx $(FDX)$, Nike $(NKE)$ and Micron $(MU)$ are set to report results.

Nvidia-backed AI startup CoreWeave is going to market its initial public offering at between $47 and $55 per share, which would translate into an offering of up to $2.7 billion, according to Reuters.

SoftBank Group said it's buying semiconductor designer Ampere Computing in a $6.5 billion deal that will expand its investments in AI infrastructure.

Cryptocurrency exchange Kraken is nearing a $1.5 billion deal for NinjaTrader, according to the Wall Street Journal.

Best of the web

Nvidia to spend hundreds of billions on U.S. supply chain, says chief.

Auto dealers, UAW local leaders brace for layoffs amid tariff war: 'Writing's on the wall.'

Menaced by Trump, Canada prepares to join EU military industry buildup.

The chart

The surge in imports to beat tariffs is starting to slow, according to a look at both inbound and outbound container traffic at Los Angeles and Long Beach ports. Usually, imports peak in the July-to-October period, ahead of Christmas. LA area ports handle about 40% of the nation's container port traffic, according to the Calculated Risk blog, where the chart appeared.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   GME     GameStop 
   PLTR    Palantir Technologies 
   TSM     Taiwan Semiconductor Manufacturing 
   AAPL    Apple 
   SMCI    Super Micro Computer 
   NIO     Nio 
   AMZN    Amazon.com 
   MSTR    MicroStrategy 

Random reads

NATO is changing its name. No, not the international security alliance.

Police had wondered where the severed head of a King George V statue ended up - and then it was seen on stage.

Fans rally to support the world's ugliest animal.

-Steve Goldstein

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 20, 2025 06:41 ET (10:41 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.