Auto Stocks Surge Following Fed Meeting; Tesla, GM Lead Rally

Stocks rallied midweek after the FOMC retained its forecast for two rate cuts this year. The culmination of the Fed’s two-day policy meeting brought no change in the target policy rate range, as was widely expected by market participants.The major indices leapt on Wednesday, fueled by a further drop in treasury yields. The S&P 500 and Nasdaq Composite both finished with gains in excess of 1%. Back on Monday, the S&P 500 notched its first set of back-to-back gains since the index’s February peak.The central bank did update its outlook on inflation and economic growth, citing uncertainties tied to President Trump’s tariff plans. Officials now see core inflation hitting 2.7% in the next year, higher than December’s projection of 2.5%. The Fed also downgraded its forecast for US economic growth, as the committee now sees GDP growth of just 1.7% versus prior estimates of 2.1%.Another noteworthy outcome yesterday was the fact that the Fed will reduce the pace of the drawdown of its balance sheet, a process which was hinted at in the meeting minutes from January. As part of a reduction in the pace of quantitative tightening, the monthly cap of treasuries that will be allowed to mature and not be replaced will be scaled down to $5 billion per month from the prior $25 billion cap.  Consumer Discretionary Stocks Bounce Post-Fed MeetingBy many accounts, the market’s price action on Wednesday was outright bullish. But that doesn’t necessarily mean we should load up on stocks and get aggressive here. Volatility is likely to remain elevated, as we’re seeing early on Thursday.Putting in a true bottom during corrections is typically a process, not a one-time event. It will take some time for stocks to work their way sustainably higher, so we don’t have to be in any rush to get too aggressive.In other words, we need to be operating from a risk-first mindset. Particularly in times of market stress and enhanced volatility, it’s imperative to keep trades on an even tighter leash and work to minimize our downside. Taking outsized losses can really harm overall performance, so we want to avoid this at all costs. At major turning points, starting with pilot positions is usually the best course of action.All eleven S&P sectors finished in the green on Wednesday, led by consumer discretionary stocks. The discretionary sector is the worst performer so far in 2025, so we’re seeing the more oversold areas of the market attempt to bounce back. Digging a bit deeper, the automotive industry was one of the biggest gainers on the day.Electric vehicle maker Tesla TSLA saw its shares gain nearly 5%, a reprieve from the recent selling pressure. CEO Elon Musk is betting big on Full Self-Driving (FSD) and robotaxis, referring to them as Tesla’s most valuable segment. Tesla plans to roll out unsupervised FSD as a paid service in Austin this June.Adding to the bullish case, the company received approval for an initial ride-hailing permit from the California Public Utilities Commission earlier in the week, an important step toward rolling out related services in the future.Despite the favorable developments, Tesla, a Zacks Rank #3 (Hold), has now lost all of its gains since the November election. Intensifying competition, falling vehicle sales, and tariff concerns are creating headwinds for the company. TSLA stock is down more than 40% this year:Image Source: StockChartsMeanwhile, General Motors GM saw its stock climb more than 2% after entering into a partnership with chip leader Nvidia (NVDA) that will pave the way for the automaker to leverage artificial intelligence services. The Detroit-based company will use Nvidia GPUs for its advanced driver-assistance systems, as well as for GM’s factory planning and robotics.GM is a Zacks Rank #2 (Buy) stock. The company is witnessing positive earnings estimate revisions, which our research has shown to be the most powerful force impacting stock prices. GM stock has held up much better in 2025, shedding only about 6% year-to-date:Image Source: StockChartsGM shares are ranked favorably by our Zacks Style Scores, with a top ‘A’ rating in our Value category as well as an overall ‘A’ VGM score. This indicates that GM is likely to move higher based on a combination of undervaluation and promising growth metrics. The stock trades at just 4.3 times forward earnings, well below the industry average.Bottom LineWith volatility persisting, now simply isn’t the time to get too aggressive. It’s a much better idea to remain patient and allow the trend to stabilize.We’re seeing oversold pockets of the market attempt to steady themselves at nearby levels. This a natural reaction and bodes well for the bottoming process, but it’s far from a sure thing. We’ve also entered a favorable stretch from a seasonal perspective, so be sure to keep an eye out for more signs of a lasting reversal.Thursday’s price action should be telling. Often times after a Fed announcement, the true extent of buying and selling pressure reveals itself on the following day. Discretionary stocks should benefit if the market continues to rally. We’ll see if stocks like TSLA and GM can follow through on yesterday’s gains.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report General Motors Company (GM): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks