U.S. Stock Market Outlook | The Federal Reserve's Interest Rate Decision is Coming, Powell's Speech Becomes the Market Focus

Pre-Market Market Trends

1. As of March 19 (Wednesday) pre-market, U.S. stock index futures are all up. As of the time of writing, Dow futures are up 0.14%, S&P 500 futures are up 0.32%, and Nasdaq futures are up 0.44%.

1. As of the time of writing, the German DAX index is down 0.36%, the UK FTSE 100 index is down 0.27%, the French CAC40 index is up 0.31%, and the Euro Stoxx 50 index is up 0.21%.

1. As of the time of writing, WTI crude oil is down 0.04%, priced at $66.72 per barrel. Brent crude oil is down 0.07%, priced at $70.51 per barrel.

Market News

The Federal Reserve's interest rate decision is coming! Can Powell provide any "encouragement" to the market? The Federal Reserve will announce its interest rate decision at 2 AM Beijing time on Thursday. Federal Reserve Chairman Powell will attend a press conference after the announcement. The market currently widely expects that the Federal Reserve will choose to hold steady at this policy meeting, keeping the benchmark interest rate at the current level of 4.25%-4.5%. Meanwhile, investors will pay more attention to Powell's remarks as well as the Fed's forward guidance and economic outlook. It is worth mentioning that investors are particularly concerned about whether the economic outlook will show the risk of "stagflation," where inflation and unemployment rise simultaneously—current market concerns mainly stem from tariff policies that may hinder economic growth and push up consumer prices.

Is something big coming? The Fed's balance sheet reduction plan may change! The Federal Reserve's interest rate decision is approaching. Market attention is not only focused on the interest rate path but also wary of potential adjustments to the quantitative tightening (QT) policy. Currently, the Fed is reducing its balance sheet at a scale of $25 billion in Treasury bonds and $35 billion in mortgage-backed securities (MBS) per month (the actual MBS reduction amount is about $15 billion), but signals of a policy shift have begun to emerge. The January meeting minutes show that officials are considering pausing or slowing the balance sheet reduction before resolving the debt ceiling issue in Congress. The Treasury's unconventional measures to maintain the debt ceiling and their exit may lead to short-term fluctuations in the funding market. When the Fed first attempted to reduce its balance sheet in 2019, it was forced to reverse course due to soaring money market rates. Deutsche Bank's Chief U.S. Economist Matthew Luzzetti predicts that this meeting may technically pause the balance sheet reduction, but Powell will emphasize restarting the plan after resolving the debt ceiling Contrary to Morgan Stanley and Citigroup? Deutsche Bank: The decline in U.S. stocks is not over, the only question is Trump. Last Friday and this Monday, the S&P 500 index rose for two consecutive trading days, seemingly signaling a bottom. Analysts from Morgan Stanley and Citigroup recently published research reports stating that they expect the U.S. stock market has bottomed out. However, Deutsche Bank believes that the sell-off in the U.S. stock market is not over, and the S&P 500 index may decline further. Deutsche Bank's chief strategist Binky Chadha stated, "We believe the sell-off in the U.S. stock market will continue... Due to the uncertainty of trade policies, which may continue to exert pressure, we expect positions to continue to be cleared at least until April 2." He predicts that the bottom of the S&P 500 index in this round of decline may be around 5250 points. He noted that although the S&P 500 index has fallen 10% from its previous high, indicating that the upward momentum of large-cap U.S. stocks is weakening, "the broader economic slowdown potentially caused by trade uncertainty has not been fully reflected in prices." He also believes that concerns about the U.S. economic slowdown and the escalating uncertainty related to Trump's tariffs are unlikely to ease in the coming weeks (or even months), and these concerns will continue to weigh on the U.S. stock market in the short term. He added that saving the current U.S. stock market hinges on one person—Trump. He stated that if Trump's approval ratings drop significantly in the short term, it could prompt the Trump administration to change its stance and take measures to reduce tariff-related uncertainties. If this happens, the growth cycle of the U.S. economy could continue.

A major U.S. forecasting institution warns: Trump is "committing" to a recession! The Anderson Forecast Center at the University of California, Los Angeles, has issued its first-ever "recession watch," citing significant impacts of Trump administration policies on the economy. The forecast center stated that the government's tariffs, immigration policies, and plans to cut federal employees could collectively lead to economic contraction. In a private memo, the Anderson Forecast Center stated, "While there are currently no signs that a recession is imminent, it is entirely possible that a recession could form in the near future." Regarding the timing of the recession, the Anderson Forecast Center only indicated that it could occur within the next one to two years. Their report stated, "Household spending patterns are beginning to show signs of weakness. The financial sector, with asset valuations being high and new risk areas introduced, is ready to amplify any economic downturn. More importantly, the recession could ultimately be stagflation."

Bank of America fund manager survey: What is the biggest tail risk? A survey by Bank of America of fund managers showed that the proportion of respondents worried about "a trade war triggering a global recession" jumped from 41% in February to 55%, becoming the top risk. The previously top-ranked concern of "inflation leading to Fed rate hikes" dropped nearly by half to 19%. The proportion of those worried about "new geopolitical conflicts" fell to just 4%, and "AI bubble" dropped to 2%. Additionally, a new entry appeared—"DOGE triggering a U.S. recession," with 13% of respondents expressing concern.

Individual Stock News

The first ride-hailing service license is granted! Tesla (TSLA.US) obtains the "stepping stone" for Robotaxi in California. Tesla has recently received approval in California to begin passenger operations, marking an important step for the electric vehicle company towards providing ride-hailing services. The California Public Utilities Commission (CPUC) stated in an email on Tuesday that it has approved the transportation charter party carrier license (TCP) for the electric vehicle manufacturer. This license will initially allow Tesla to use its own vehicles to transport employees on a pre-arranged basis, and will later expand to public passengers. Tesla applied for this license last month with the aim of launching its promised ride-hailing business, opening up new revenue sources, and competing with Uber, Lyft, and Waymo. Notably, this new license is different from those used by ride-hailing companies, which provide similar services through smartphone apps and charge fees. The CPUC stated that this license does not allow Tesla to provide passenger services using autonomous vehicles. As of the time of publication, Tesla's stock rose over 3% in pre-market trading on Wednesday.

ZTO Express (ZTO.US) releases annual performance: net profit of 8.888 billion yuan, a year-on-year increase of 1.5%, with parcel business and cost optimization progressing simultaneously. Data shows that in the fourth quarter of 2024, the company's revenue was 12.92 billion yuan (RMB, the same below), a year-on-year increase of 21.7%; net profit was 2.447 billion yuan, a year-on-year increase of 10.7%; basic net earnings per American Depositary Share (ADS) were 2.97 yuan. For the entire year of 2024, the company’s revenue was 44.281 billion yuan, a year-on-year increase of 15.3%; net profit was 8.888 billion yuan, a year-on-year increase of 1.5%; basic net earnings per ADS were 10.95 yuan; it plans to distribute a mid-term dividend of 0.35 USD per ADS and common stock. ZTO completed a business volume of 34 billion pieces in 2024, a year-on-year increase of 12.6%, with the growth rate of parcel business volume in the fourth quarter approaching 50%, far exceeding the overall business volume growth rate; the volume of reverse orders in parcels achieved a doubling growth year-on-year. As of the time of publication, ZTO Express rose nearly 3% in pre-market trading on Wednesday.

Lexin (LX.US) releases Q4 financial report: revenue of 3.66 billion, profit increased by 32.5% year-on-year, with continuous improvement in various operational indicators. Lexin, a leading new consumption digital technology service provider in China, released its unaudited financial performance for the fourth quarter of 2024: revenue of 3.66 billion yuan; profit (Non-GAAP EBIT) of 460 million yuan, a year-on-year increase of 32.5% and a quarter-on-quarter increase of 12.5%, achieving a significant increase for three consecutive quarters. The company's asset quality continued to improve after reaching a turning point in the previous quarter, with various core operational indicators accelerating positively. In the fourth quarter, the company's transaction volume was 51.96 billion yuan; the managed loan balance was 110.27 billion yuan.

Important Economic Data and Event Forecasts

Beijing time the next day at 02:00, the Federal Reserve FOMC will announce the interest rate decision and economic outlook summary.

Beijing time the next day at 02:30, Federal Reserve Chairman Jerome Powell will hold a monetary policy press conference

Performance Forecast

Thursday morning: Huanyuq (YY.US)

Thursday pre-market: Accenture (ACN.US), Huazhu (HTHT.US), Yirun Zhike (YRD.US), Baozun E-commerce (BZUN.US), Xinyang (SY.US)