US stocks surged on Wednesday, with the S&P 500 hitting a fresh record as investors digested the Federal Reserve’s latest policy guidance on anticipated rate cuts for the year.
The S&P 500 closed above 5,200 for the first time, while the Dow Jones Industrial Average jumped nearly 400 points to set a new all-time high. The Nasdaq Composite also finished more than 1% higher.
Federal Reserve officials maintained interest rates steady at 5.25%-5.5%, in line with broad market expectations.
Furthermore, officials reiterated their guidance through the dot plot, indicating the possibility of three 25 basis-point rate cuts later in 2024, contingent on inflation continuing its downward trajectory.
“We are strongly committed to returning inflation to our 2% objective,” stated Fed Chair Jerome Powell in prepared remarks on Wednesday afternoon. He later added, “As labor market tightness has eased and progress on inflation has continued, the risk to achieving our employment and inflation goals are coming into better balance.”
Following the meeting, investors increased their expectations that the Fed could implement the first rate cut by the middle of the year. According to the CME FedWatch tool, markets are now pricing in a 73% probability of at least one rate cut by the end of June.
“The FOMC has stuck to its view that the underlying inflation picture is improving, notwithstanding the disappointing numbers in the past two months,” noted Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, in a Wednesday note. “We are encouraged by policymakers’ decision to stick with three rate cuts this year and to forecast a markedly slower run rate in core inflation across the remainder of the year.”
“The immediate market reaction is the relief we were expecting,” remarked Bryce Doty, Vice President of Sit Investments Associates, in a note. “It’s good to see the Fed understands it can cut rates while still being tough on inflation given that the real fed fund rate will still be considered very restrictive.”
According to BI.
You might enjoy:
