By William Watts
Hedge-fund legend David Tepper isn’t sweating the change in tone by the Federal Reserve at its June policy meeting, offering reassurance in remarks to CNBC on Thursday morning. Tepper, the founder of Appaloosa Management, has one of the strongest track records among active investors, and his remarks often move markets .
Investors were still digesting the changes, which saw Fed policy makers on Wednesday pencil in two interest rate hikes by the end of 2023 and Chairman Jerome Powell acknowledge that discussions around the eventual tapering of the central bank’s $120 billion-a-month asset-buying program had begun.
U.S. stocks sank Wednesday, but finished off session lows, following the Fed’s pronouncements. Activity across financial markets was volatile Thursday. In stocks, the tech-heavy Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.04% ended just shy of a record close, while the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.68% slumped 210.22 points, or 0.6%, and the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.01% edged lower by less than 0.1%.
Rather than a tantrum, the long end of the Treasury market saw buying, sending the yield on the 10-year note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% down by more than 4 basis points. Yields and bond prices move in opposite directions. The dollar found support, however, with the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY +0.09% jumping 0.9% to hit a 2-month high.
Tepper in March told CNBC that it was very difficult to be bearish on stocks, arguing that a selloff in U.S. Treasurys that had driven up yields and unsettled investors across financial markets had likely run its course. Tepper was on the mark, with yields stabilizing and eventually edging back below 1.5% ahead of Wednesday’s Fed meeting, while stocks ground higher, with major stock indexes pushing on to record territory.