The S&P 500 (SPX) closed slightly in the red on Wednesday after the Fed voted 8-2 to maintain interest rates between 3.50% and 3.75%. The index briefly surpassed an all-time high of 7,000 in early-morning trading, although it ended the day below the psychological price level.
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Fed Governors Stephen Miran and Christopher Waller were the two dissenting officials, voting in favor of a 25 bps rate cut. Waller’s vote was closely scrutinized given his candidacy for the Fed Chair position. A vote in favor of lower rates could support his odds of being nominated by President Trump, who has repeatedly advocated for aggressive rate cuts. Waller’s odds of being nominated by Trump jumped to 12% from 9.5% after the Fed announced its decision.
During the following press conference, Fed Chair Jerome Powell highlighted resilient consumer spending alongside a surprisingly strong economy. “The outlook for economic activity has clearly improved since the last meeting,” he said. In another bright spot, Powell expects tariff-driven inflation to peak sometime during the middle of the year before coming down. A strong economy with falling inflation lowers the case for additional rate cuts. Following these comments, the odds of a 25 bps reduction at the March 18 Federal Open Market Committee (FOMC) meeting fell to 11.9% from 16.7% a day ago on CME’s FedWatch tool.
At the same time, Powell emphasized that low job openings and hiring rates point to continued risks in the labor market. In addition, he believes that AI could displace some jobs in the near term, with the unemployment rate for recent college graduates already facing an impact.
Meanwhile, tensions between the U.S. and Iran are on the rise after Trump emphasized that a “massive Armada is heading to Iran,” and urged the country to sign a deal to scrap its nuclear development program. “Time is running out, it is truly of the essence!” Trump said in a Truth Social post. “As I told Iran once before, MAKE A DEAL!”
Elsewhere, gold has handily outperformed the S&P 500 over the past year, returning 90% compared to the benchmark index at 15%. That doesn’t bode well for stocks, according to Stifel Chief Equity Strategist Barry Bannister. Such periods of significant outperformance from the precious metal have happened only four times during the past century, and each was followed by poor stock returns. “The S&P 500 was range-bound for years after the S&P 500 relative to gold crossed this threshold in the past,” wrote Bannister.
The S&P 500 (SPX) closed with a less than 0.01% loss, while the Nasdaq 100 (NDX) returned 0.32%.