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Morning Commentary

Facebook Flies But Fed Bigger News 
By Charles Payne, CEO & Principal Analyst
2/2/2017 9:22 AM

While the market couldn’t hold onto early gains on Wednesday, major indices put the brakes on a slide that was making folks antsy.  Of course, there are still a lot of questions and concerns that need to be answered, including a glimpse of those pro-growth policies that have business and investors salivating. 

The one issue that we could put on the shelf for the moment is the Federal Reserve derailing the rally.  The Federal Open Market Committee (FOMC) statement read like one of those days when you don’t have a care in the world while enjoying a halcyon summer afternoon lying out in the grass.

Fed Statement:

The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Yesterday’s FOMC statement put the kibosh on a possible rate hike in March, and May might be off the table as well. This is a perfect cover for investors that can now root for a stronger-than-expected growth, understanding that the Fed isn’t eager to be preemptive.

Fed Rate Hike

FOMC Meeting

50 -75 Current

75 – 100

100 – 125

125 – 150

150 – 175

March

82.3%

17.7%

 

 

 

May

61.2%

34.2%

4.5%

 

 

June

30.1%

47.9%

19.6%

2.3%

 

July

24.1%

44.4%

25.3%

5.7%

0.5%

After the close, Facebook (FB) posted its quarterly earnings; once again, it blew away consensus estimates for all critical metrics.  Consequently, the stock is soaring in after-hours trading and is poised to begin trading today at an all-time high.

I like the Facebook story, but it’s singular and doesn’t speak to a broader economic growth.  On the contrary, I think it sucks up a lot of time, and most employers should find a way to block it during working hours.  Apple (AAPL) speaks to a consumer who can spend money when they perceive value. However, Amazon (AMZN) and Google (GOOGL) might have better ties to economic growth beyond Silicon Valley.

Today’s Session

Looks like another sloppy start to the market with harsh reactions to earnings misses and general angst ahead of tomorrow’s jobs report.  Deal news has Mead Johnson (MJN) soaring and Macy’s (M) higher as well.  There is also concern today that President Trump will take direct aim at Silicon Valley over immigration and the use of foreign workers.

President Trump is also set to meet with management of Harley Davidson (HOG), which just laid an earnings egg and saw current and next year earnings consensus lowered.  Remember Ronald Reagan placed tariffs on Japanese motorcycle makers in April 1983 to re-level the playing field.  That move was greeted with relief from the industry with HOG CEO Vaughn Beals saying “we’re delighted.”

A couple years later, Harley asked for the tariffs to be removed.


 

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