Stocks experienced a notable rise on March 4, 2024, despite initial concerns stemming from a Department of Justice investigation into Federal Reserve Chair Jerome Powell. Although markets opened lower, they rebounded by midday as investors shifted their focus to upcoming inflation data and the commencement of the fourth-quarter earnings season.
Late last week, the Federal Reserve was issued subpoenas that could lead to a potential criminal indictment for Chair Powell. This inquiry is based on his testimony to the Senate Banking Committee regarding renovations to the central bank’s buildings last summer. In a video statement released on Sunday, Powell described the subpoenas as “an unprecedented action,” warning that such measures could jeopardize the independence and integrity of the Federal Reserve.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation,” Powell stated.
Despite these concerns, market participants appeared to downplay the implications of the investigation. The yield on the 2-year Treasury note edged up by 0.1 basis point to 3.541%, while the yield on the 10-year Treasury rose by 1.6 basis points to 4.187%. The S&P 500 increased by 0.2% to close at 6,977, the Dow Jones Industrial Average also gained 0.2% to reach 49,590, marking new record closing highs. The Nasdaq Composite added 0.3% to finish at 23,733.
Financial stocks contributed to the upward momentum, though they faced some pressure after former President Donald Trump proposed a one-year 10% cap on interest rates charged by credit card companies. As a consequence, American Express (AXP) became the most significant underperformer on the Dow, losing 4.3% and shedding approximately $11 billion in market value. Despite this setback, Erika Najarian, an analyst at UBS Global Research, expressed skepticism regarding the implementation of the proposed freeze, noting that it would require congressional approval.
The financial sector faced additional headwinds, particularly with JPMorgan Chase (JPM) declining by 1.5% in response to Trump’s rate-cap proposal. The bank is set to release its quarterly earnings report on Tuesday, which unofficially signals the start of the fourth-quarter earnings season. Analyst Ebrahim Poonawala from BofA Securities recently raised his earnings-per-share estimate for JPMorgan to $4.97, up from $4.87, indicating a belief that weaker banking revenue will be offset by strong trading performance.
Meanwhile, Abercrombie & Fitch (ANF) saw its shares plummet nearly 18% following a disheartening update on its guidance for the holiday quarter and the full fiscal year. The retailer now anticipates fourth-quarter sales growth of “around 5%” and earnings per share between $3.50 and $3.60. This is a downward revision from previous expectations of 4% to 6% sales growth and earnings of $3.40 to $3.70 per share. The company also narrowed its full-year forecast, now projecting sales growth of “at least 6%” and earnings per share between $10.30 and $10.40.
The significant drop in Abercrombie & Fitch shares marks a sharp turn from the nearly 80% increase seen since late November, highlighting the volatility often associated with retail stocks.
As the stock market navigates these complexities, analysts and investors continue to monitor both the implications of the DOJ investigation and the forthcoming earnings reports, which will provide crucial insights into the health of various sectors as 2024 progresses.
