(Bloomberg) -- U.S. stocks were at a record exactly six months ago. Going by the pace of the past few sessions’ advances, we could be making a new high before the March Madness college basketball tournament ends on April 8.

The S&P 500 is 3.4% away from the 2,930 threshold, and we could be even closer had investors not blinked in the last hour of Tuesday’s session and turned a solid rally into a flat close. They can’t be judged: stocks are up 20% since late December, Jerome’s Powell dovish pivot and optimism over a trade war resolution are all priced in. To keep the stocks rallying or at least be where they are, we need the Fed to give investors a new dovish surprise.

Traders are leaning toward a rate cut as the next move in 2019 and are fully pricing in a quarter-point reduction by the end of next year, Fed fund futures show. Policy makers’ median projection in their last update, in December, was for three more quarter-point hikes by the end of 2020. It’s expected that those estimates will come down, but the question is by how much.

A couple strategists strike a cautious tone:

  • Joseph Kalish, chief global macro strategist at Ned Davis Research: “Although the market is not expecting any rate hikes this year, we doubt that a majority of FOMC participants will be in the zero camp. In fact, a reasonable case can be made for the resumption of policy normalization later in the year.”
  • Chris Zaccarelli, chief investment officer at Independent Advisor Alliance: “Markets this year are anticipating a return to earnings growth, a Fed on hold and the resolution of the trade dispute with China, but if any of these things fail to materialize then we are going to see a quick reversal of the gains.”

Some are more optimistic:

  • Steve Ricchiuto, chief U.S. economist at Mizuho Securities USA: “If the Fed takes it down to zero rate hikes this year and implies zero for next year, the equity market will do better. I don’t know if we go past all-time highs but we can certainly go back and test it.”
  • Anthony Saglimbene, a global market strategist for Ameriprise Financial: “The 2,800, we’ve kind of surpassed. I wouldn’t say we’re safely through it, but I think the pain trade for stocks over the near-term is higher. So as long as we don’t see any kind of real deterioration in terms of economic growth, we’re in a window of the next few weeks that likely push stock prices higher.”

When policymakers made their last interest rate announcement on Jan. 30, the S&P gained 1.6% in what was the first gain on the day of a Fed decision since Powell took office. Stocks tried (and failed) to hold on to the 2,850 level for the first time since October yesterday, helped by a 12% jump in Advanced Micro Devices, on optimism that its processors will be used in Google’s video-game streaming service. (That news oddly enough has been known since January.) Clouding the sentiment today is FedEx, which is down more than 6% in early trading after cutting its annual profit forecast for the second time in three months on overseas weakness. The bank rally has also sputtered, with the SPDR S&P Bank ETF posting its worst day since December.

Sectors in Focus Today:

  • Banks will again be in focus ahead of the Fed’s decision. They steadily faded in Tuesday’s session, with the KBW Bank Index closing down 1.3%. Regional banks were among the worst performers, while the biggest “universal” banks -- with less exposure to a dovish Fed -- lost the least. Citigroup, with a 26% jump so far this year, and BofA, up 20%, are outperforming peers and the broader market.
  • Semiconductor stocks, which reached a record a year ago, are 2.7% from doing it again. Micron’s earnings release after the close can push the sector one way or another (note that Rosenblatt cut its earnings expectations Tuesday citing “challenging” conditions for its DRAM and NAND memory chips. Citigroup went further, forecasting a “crash” in pricing for DRAM)
  • Watch auto stocks (FCAU, F, RACE, GM, TSLA) after BMW warned that earnings will fall “well below” last year’s level and embarked on a $14 billion efficiency drive to offset the impact of trade conflicts
  • Delivery stocks will likely sink after FedEx’s disappointing earnings; UPS and XPO Logistics were both down in post-market trading
  • Rate-sensitive sectors will likely move on the Fed’s rate announcement. Watch the Utilities Select Sector SPDR Fund and the iShares Mortgage Real Estate ETF.

Notes From the Sell Side

Monster Beverage was downgraded to neutral from buy at Goldman Sachs, which wrote that U.S. sales could “remain softer than expected” in the near term, pressuring earnings expectations. The company, a long-time outperformer that has lagged recently, was also removed from the Conviction List at Goldman, which lowered its price target to $59 from $67. Analyst Judy Hong also cited higher commodity costs and increased competition as factors to be cautious about.

Goldman is merely the latest in a series of cautious reads on the company. On Tuesday, Wells Fargo forecast muted growth following an analysis of Nielsen data. Earlier this month, BMO Capital Markets cut the stock to market perform, saying the valuation “may be as good as it gets” due to the “cloudier growth outlook” and competition from Red Bull and the energy drink Bang. Also this month, Citi removed Monster from its Focus List, seeing little room for upside while remaining “very bullish” on the company’s outlook.

Separately, Jefferies downgraded Sony to hold from buy, ending a five-year stretch of the company being viewed as a Top Pick. The price target on the U.S.-listed shares was lowered to $50.70 from $77.62. Analyst Atul Goyal cited the company’s “unwillingness” to exit the smartphones business, which he called both “a disappointment and a strategic mistake.” The inability to exit smartphones is “resulting in continued losses, a peak of game profits and increasing uncertainty” that implies “pedestrian profit growth” over the next two years. The valuation isn’t expensive, Jefferies said, but “it is likely to slowly derate as growth investors look for exits.”

Tick-By-Tick to Today’s Actionable Events

  • 7:00am -- MBA Mortgage Applications
  • 8:00am -- ALXN investor day
  • 8:30am -- General Mills conference call
  • ~12:20pm -- AT&T CEO speaks at the Economic Club of Washington D.C.
  • 1:00pm -- NTNX investor day
  • 1:00pm -- SBUX annual meeting
  • 2:00pm -- FOMC Rate Decision
  • 4:01pm -- Micron earnings
  • 4:30pm -- Micron earnings conference call
  • Farfetch lock up expires
  • March 18-22: Game Developers Conference (GDC) runs in San Francisco
  • FDA deadline for decision on JAZZ’s drug for excessive sleepiness

--With assistance from Vildana Hajric, Mark Tannenbaum, Felice Maranz and Ryan Vlastelica.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Catherine Larkin

©2019 Bloomberg L.P.