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Will Fed-fueled stock-market rally last? It depends on the data

Will Fed Fueled Stock Market Rally Last? It Depends On The Data part is one like the Finance, Forex categories, written on top of our scripter Erick Emerson on top of January 31, 2019, these post can search much as the tags data, depends, Fedfueled, Rally, stockmarket. I'm happy to joyful you as well providing those anothers paper in regard finance as well as I'm always publishing the post routine.

Pay more attention to the data, less to Fedspeak.

That’s one takeaway for stock-market investors after the Federal Reserve on Wednesday delivered an unexpected about-face on policy, signaling that its rate-hike cycle is at least on pause and could conceivably be over. Asked whether the next move would be a hike or a cut, Fed Chairman Jerome Powell told reporters it would “depend entirely on the data.”

Read: ‘Patient’ Fed adopts wait-and-see stance as Powell says case for higher rates ‘weakens’

“We will all be data dependent,” said Ed Keon, chief investment strategist at QMA, the quantitative arm of PGIM with $128 billion in assets under management.

The Fed’s pivot lit a fire under the stock market, with equities soaring in the wake of the policy statement and during Powell’s news conference. Bonds also rallied, dragging down Treasury yields, especially at the short end, and steepening the yield curve. The softer stance sent the dollar tumbling, which in turn provided a boost to gold.

Read: How a dovish Fed sparked a stock-market rally and tanked the U.S. dollar

Stocks were putting in a mixed performance early Thursday, with the S&P 500

SPX, +0.76%

 up 0.7% and the Dow Jones Industrial Average

DJIA, -0.16%

 off 32 points, or 0.1%. Treasurys extended gains, with the 10-year yield

TMUBMUSD10Y, -1.73%

 falling 5.9 basis points to 2.634%.

The Fed effectively switched from a policy stance centered on inflation targeting back to a “risk-management” approach, said Lena Komileva, chief economist at G Plus Economics, in a Thursday note. One implication is that stocks and other assets perceived as risky will again tend to find support on softer data that’s seen keeping inflation worries in check while potentially suffering in the wake of stronger data.

“The reversion in the Fed’s position from a risk-taker back to a risk-watcher means that ‘bad news’ is once again ‘good news’ but also leaves market rates more sensitive to upside surprises in the inflation data as the profits squeeze from higher U.S. labor costs, disrupted international supply chains and international tariffs begin to feed through,” she said.

The Fed’s more “patient” approach will serve to decouple financial conditions from real economic strength, she said, an echo of the Fed’s quantitative-easing phase and the early stages of the rate-hike cycle, which resulted in a “reflationary and pro-cyclical” stance in relation to the economy “and a strongly risk-positive stance for financial markets.”

Pro-cyclical, indeed. David Rosenberg, chief economist at Gluskin Sheff, noted the shift comes even as the Fed retained its “uber-bullish” view on the domestic economy, describing overall activity as rising at a “solid rate,” the labor market as “strong,” and consumer spending expanding “strongly.”

“I would have at least expected the Fed’s comment on the economy to be somewhat less ebullient to justify this shift in the policy bias, but by not doing so tells me that Mr. Market now has Mr. Powell’s ear,” he said, in a note. Instead, the Fed would have been justified tying its change in stance to a deteriorating economic outlook, he said.

Keon said the Fed’s shift from a hawkish to a dovish stance “also means that Fed rhetoric will lose force for moving markets, and the key question…

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