"I like to study failure…we want to see what has caused businesses to go bad." - Warren Buffett
Image of Fed Chairman Jerome Powell generated by Grok on X
The markets breathed a sigh of relief on Wednesday after the Federal Reserve held interest rates steady, sending stocks soaring for the first time in a while. By Thursday, the enthusiasm fizzled, and stocks finished the session fractionally lower.
Let's start with the bullish case. On Wednesday, the Dow Jones Industrial Average added nearly 400 points while the tech-heavy Nasdaq Composite led the rally with a 1.4% advance. The S&P 500 wasn't too far behind, tacking on about 1% and further distancing itself from perilous correction territory.
But by Thursday, the markets couldn't keep the momentum going as all three of the major stock market indices finished the day in the red.
So, what had stocks rallying to begin with? At this week's FOMC meeting, policymakers decided to leave interest rates unchanged, where the target range will continue to hover between 4.25% and 4.5%. That's precisely the outcome the markets were hoping for. The icing on the cake was that Fed Chairman Jerome Powell didn't renege on his commitment to two rate cuts in 2025, giving the markets reason for greater optimism.
In his comments, Powell mentioned that inflation has come down over the past couple of years despite continuing to elude the Fed's 2% target. While consumer prices might inch higher yet again, Powell insisted that any further inflation would be "transitory" in nature. The Fed Chair said the economy is strong, and while sentiment might be down, economic activity is not.
Tech Roundup
Wedbush analyst Dan Ives remains bullish on technology stocks, predicting they will set fresh all-time highs in H2 2025. He likes Palantir, an AI-powered software company specializing in data analytics, forecasting that it will become a member of the trillion-dollar market cap club over the coming years.
Big Tech stocks participated in the mid-week rally, led by Tesla's much needed 4.6% gain. On the flip side, the number of investors shorting Tesla stock is also on the rise, increasing 16.3% over the past month alone to 2.6% of the electric vehicle maker's total shares, per S3 Partners. Elon Musk's net worth now hovers at $31 billion, down $122 billion year-to-date, according to the Bloomberg Billionaire Index.
Nvidia's stock got rewarded after CEO Jensen Huang unveiled the chip maker's latest AI innovations at the company's high-profile annual conference, GTC 2025. Huang told CNBC he isn't worried about the tariffs, saying they aren't likely to have an impact on Nvidia in the near term.
Huang also revealed that Nvidia plans to open a quantum computing facility in Boston, Massachusetts. In response, quantum computing stocks like D-Wave Quantum and Rigetti Computing were sent lower on Thursday, owing to fears of competing against the AI giant. Analyst firm Bernstein reiterated its "outperform" rating on Nvidia stock with a price target of $185 attached, reflecting 57% upside potential. The analysts said AI "is still Nvidia's game to lose."
Here's a sight that has been missing from the markets of late, with each of the Magnificent Seven stocks finishing the trading day firmly in the green on Wednesday:
Image courtesy of X
Markets Snapshot
Index | Thursday Close | Point Change | Percentage Change |
S&P 500 | 5,662.89 | 🡇 12.40 | 🡇 0.22%
|
Dow Jones Industrial Average | 41,953.32 | 🡇 11.31 | 🡇 0.03% |
Nasdaq | 17,691.63 | 🡇 59.16
| 🡇 0.33%
|
Here's a look at the S&P 500's returns over the past 10 years:
2015: +1.3%
2016: +12%
2017: +21.7%
2018: -4.6%
2019: +31.2%
2020: +18.4%
2021: +28.8%
2022: -18.2%
2023: +26.2%
2024: +24.9%
2025: -3.2% year-to-date
Market Correction vs. Bear Market
While the markets have taken investors on a roller coaster ride in 2025, that doesn't necessarily mean that investors should start selling, according to Carson Research's Ryan Detrick. He outlined reasons why investors should avoid hitting the panic button despite the market's 10% decline from all-time highs that put it in correction territory. One thing is for sure, market correction or bear market, investor sentiment is down and has resulted in the biggest move to cash since the height of the pandemic.
Image by Pixabay
Carson Research's Detrick doesn't believe this volatility will result in a bear market, which is triggered when stocks fall by a steeper 20% or more. He says that should be reason enough not to sell, explaining that there have been just over a dozen times in which markets have entered into correction territory but have managed to avoid a full blown bear market.
Detrick explained, "13 of the previous 39 corrections turned into bear markets. All bears start with a correction, but not all corrections turn into a bear market."
Image by Carson Research
Look Ahead
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