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Fed Minutes Firm Market; NVDA, WSM Beat, Head Separate Ways

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Don’t look now, but the Dow is currently riding a four-day winning streak amid these bear-market conditions: +202 points, or +0.63% on the day. It’s still down double-digits year to date, but one thing at a time…

The Nasdaq performed well amid these whipsaw conditions: +1.48%, or +166 points, but still not where it was as of Monday’s close. The S&P 500 split the difference: +0.96%, while the small-cap Russell 2000 was the big winner on the day, +1.95%.

Minutes from the most recent Federal Open Market Committee (FOMC) meeting earlier this month underlined what we saw in the headlines and from Fed Chair Jay Powell’s press conference: 50 basis-point hikes are currently expected for the next two FOMC meetings — June and July (the Fed takes August off) — which would bring the Fed funds rate to a range of 1.75-2.00% by Labor Day.

The Fed also looks to move monetary policy to a “restrictive” stance from a “neutral” one, possibly including 50 basis-point hikes in the three FOMC meetings remaining in the fall of 2022. A 3.5% Fed funds rate by December would represent that move toward aggressively tightening its grip on inflation — 2.5-2.75% is seen as a “neutral” stance.

This is also predicated on inflation remaining stubbornly high through the rest of the year, which may itself not be the case. Should inflation metrics draw down meaningfully, say, by the Fed’s September or November meeting, perhaps we could see monetary policy ease as well. On the balance sheet, rolling off assets growing to $95 billion by late summer will help drain some of the exorbitant excesses currently held from a pandemic’s worth of buybacks, and then some.

NVIDIA (NVDA - Free Report) shares tumbled another -10% after hours Wednesday, as the microchip innovator posted beats on both top and bottom lines, but guided down next-quarter revenues from Zacks consensus estimates. Earnings of $1.36 per share beat expectations by 6 cents, and quarterly sales of $8.29 billion easily surmounted the $8.12 billion analysts were anticipating.

It’s the 14th straight earnings beat for the creator of the Graphics Processing Unit (GPU), used in everything from video games to crypto to A.I. Yet shares in this “technophobic” market in 2022 had already plunged -44% prior to this latest sell-off. Chinas supply chain disruptions and conditions in Russia contributed to the lowered guidance, but investors will be listening closely to CEO Jensen Huang on the conference call.

Williams-Sonoma (WSM - Free Report) , however, put up excellent Q1 numbers that were rewarded by market participants in the late session today: earnings of $3.50 per share surpassed the $2.99 expected and the $2.93 per share in the year-ago quarter, while revenues of $1.89 billion topped the $1.83 billion in the Zacks consensus. Brand revenue growth at Pottery Barn and West Elm led the way for the high-end homeware retailer, sending shares as high as +19% after-hours.

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