Powell lowers interest rate expectations again, but why is the market "not too concerned"?

The reaction of the US stock market to Federal Reserve Chairman Powell's hawkish remarks on interest rate prospects on Tuesday was tepid, which may have surprised some market observers.Federal Reserve Chairman Powell turned hawkish on Tuesday, stating that recent data indicate a lack of further progress in inflation, and it may take longer to have confidence in inflation, making it appropriate for high interest rate policies to remain in effect for a longer period.Powell's "cautious reset" of the rate cut plan described by Evercore ISI analysts should have triggered greater market volatility.However, investors remained mostly calm. The S&P 500 index closed higher than its intraday low, while the Dow Jones Industrial Average ended a six-day losing streak.The yield on the two-year US Treasury note, sensitive to interest rates, briefly exceeded 5%, reaching its highest level since November, but closed 4 basis points below its intraday high.Market strategists and fund managers attribute the market's calmness to two factors.First, other Federal Reserve officials had already given the market a "vaccine" before Powell, stating that they were unwilling to cut rates without further signs of inflation slowing down.For example, earlier on Tuesday, Federal Reserve Vice Chairman Philip Jefferson hinted that rates could remain at their highest level in over 20 years until "persistent" inflation shows further signs of slowing down.San Francisco Fed President Daly, Chicago Fed President Gulsby, and other officials expressed similar views.Phil Kosmala, Managing Director of investment advisory firm Taiber Kosmala & Associates, said:Powell's remarks today are not significantly different from those of other FOMC members who have recently spoken.Another reason is that, as stock strategist Savita Subramanian pointed out, corporate earnings have now replaced monetary policy as the main driver of stock market volatility.According to the latest forecast from the Atlanta Fed's GDPNow tracking indicator, US first-quarter GDP is expected to grow by 2.9% year-on-year, which is a positive signal for corporate earnings.Analysts believe that from all perspectives, the biggest threat to the current US stock market is not the Federal Reserve, but rather corporate profit growth.Rob Haworth, Senior Investment Strategist at Bank of America Asset Management, said that investors can no longer rely on Fed rate cuts to boost the stock market. Instead, companies may need to meet Wall Street's profit growth expectations to sustain the rebound.Earnings remain key to the marketKosmala believes that the biggest profit risk may occur in the fourth quarter, with earnings of the S&P 500 index expected to grow by 17.7% and revenue by 5.8%.