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Bear Country: Tesla (TSLA), Intel (INTC) Beat but Sell Off

Today, in its statement following the latest Federal Open Market Committee (FOMC) meeting, the Fed kept interest rates unchanged at 0.00-0.25%. This comes as no surprise, as the final installments of the taper program, buying fewer and fewer Treasury bonds and mortgage securities, is scheduled to end in March. In a separate note, the Fed also plans to reduce its $9 trillion balance sheet, but not until after interest rate moves have begun.

This is all as expected on Wall Street: markets have been busy over the past few weeks pricing in no fewer than four interest rate hikes in 2022, roughly one every other FOMC meeting. Even still, stocks rolled off session highs not 20 minutes past the Fed statement release. And markets continued to creep lower during Fed Chair Jay Powell’s press conference which followed the FOMC statements, as the 10-year Treasury yield nudged first over 1.8%, pushing toward 1.86% by the time Powell was finished taking questions.

Substantively, there wasn’t anything different emphasized this time around: inflation continues “well above 2%,” with residual supply/demand imbalances from the ongoing pandemic largely responsible; the Unemployment Rate has fallen sharply, with labor demand historically strong, and participation “subdued” by an aging population. Powell said interest rate policy will require “humility” and being “nimble.”

Powell also did not add any reassurances regarding whether this now-near-certain March rate hike will constitute a quarter-point or half-point rise, citing the FOMC will make that decision during its March meeting. In short, he left the door open for increased hawkishness, and this would no doubt be contingent on inflation reads from economic prints over the next six weeks until the next meeting. There is also no suggestion from the Fed Chair that “only” four rate hikes may be in the works for 2022.

Regardless whether the Fed should or should not be more hawkish in its monetary policy going forward, it might be said Powell let slip through his fingers a chance to assure market participants that there will be no reckless advancement of leaping rate hikes and balance-sheet draining. Powell has proven over time to be attuned to economic concerns but perhaps slow to react; in the interest of quashing this narrative about his Fed leadership, it appears he is fine with investors believing he will move higher and faster than earlier anticipated. Markets went from the green to the red by the time of the closing bell.

Tesla TSLA shares fell -5% immediately after its Q4 earnings report hit the tape after the closing bell, even as the EV leader outpaced expectations on both top and bottom lines: earnings of $2.54 per share easily beat the $2.11 Zacks consensus, while $17.72 billion in quarterly sales swept past the $16.07 billion analysts were looking for. Shares have buoyed up a tad ahead of today’s conference call. After a rough patch in its earnings history a couple years ago, Tesla has beaten expectations in nine of the last 10 quarters.

Intel INTC also dropped on its easy Q4 beats this afternoon, with earnings of $1.09 per share on $19.5 billion in revenues well ahead of the 90 cents per share and $18.3 billion analysts were expecting. Guidance for next-quarter earnings was 80 cents per share, which is below the 84 cents in the Zacks consensus. This may go some ways to explain how Intel hasn’t posted an earnings miss since Q3 2013.

Markets were down across the board, save the Nasdaq, which was basically flat. It’s bear territory this winter, and even Fed policy projections aren’t able to put them back into hibernation at this stage. The Nasdaq is -17% from its all-time highs set in November of last year. The S&P 500 is -10% off its most recent highs. The small-cap Russell 2000 has given away all its 2021 gains, and then some.

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