Navigating monetary policy announcements from the Federal Reserve can be a minefield for stock market investors. Bespoke Investment Group noted late Tuesday that the S & P 500 has “shown consistent late-day weakness on Fed days, especially more recently.” After the Fed ended its December meeting, the S & P 500 dropped 3% — and that was after the central bank lowered rates by a quarter-percentage point. “A large portion of that weakness last month came at the end of the day, but that has been more a factor of usual Fed day trading patterns than anything reactionary to the contents of the statement or press conference,” Bespoke said. “Across all Fed days the S & P 500 has fallen in the final hour more than half the time (55%).” The reaction to the December Fed meeting also marked the biggest Fed day decline for the S & P 500 since 1994, according to Bespoke, and the fourth time the market benchmark fell in reaction to a central bank decision in 2024 alone. This time around, the Fed isn’t expected to make changes. The CME Group’s FedWatch tool shows a 99.5% probability of the fed funds rate staying in the current range of 4.25% to 4.5%. Traders are also bracing for a smaller-than-normal move in the market. Goldman Sachs head of derivatives research John Marshall noted that S & P 500 options imply a 0.6% move in either direction for the index. That would be lower than the average realized move of 1.4% over the last four Fed days. That said, if Fed Chair Jerome Powell signals fewer rate cuts are on the horizon, it could spark a sell-off similar to the one seen in December. Conversely, if he provides a more dovish policy outlook, it could drive stocks higher. Goldman’s Marshall also highlighted several stocks that have seen outsized moves on Fed days going back to 2022. In theory, these could create opportunities for a quick gain if bought ahead of the announcement. Here are some of the stocks that made the Goldman list, along with their average Fed day move (in either direction): Albemarle : 2.5% PNC Financial : 1.8% Enphase Energy : 3.8% Amgen : 1.1% American Airlines : 2.1% Elsewhere Wednesday on Wall Street, Oppenheimer downgraded Apple to perform from outperform, citing worries around iPhone sales and artificial intelligence innovation. “We see a twofold challenge ahead for iPhone growth: 1) stronger competition in greater China and 2) lack of compelling Apple Intelligence and generative AI apps to accelerate near-term device replacement,” analyst Martin Yang said in a note to clients. “With slower-than-expected iPhone sales since last September and elevated valuation, we believe it will be challenging for AAPL to outperform.”
