In a remarkable surge on Wednesday afternoon, US markets experienced significant gains following the Federal Reserve’s final policy decision of the year. The Dow, closing at 37,090.24, soared by 1.4%, surpassing its previous record high set nearly two years ago at 36,799.65.
The S&P 500 and the Nasdaq also enjoyed a 1.4% increase each, marking a celebratory moment on Wall Street in response to the Federal Reserve’s announcement of maintaining steady interest rates after almost two years of aggressive rate hikes. The central bank also revealed expectations of three rate cuts in 2024.
The Hike in Stats:
This surge propelled the Dow’s year-to-date gains to an impressive 11.9%, with the S&P 500 approaching a record high and boasting a 22.6% increase in 2023. The Nasdaq Composite witnessed an extraordinary rise of over 40% throughout the year.
Analysts, such as Joseph Brusuelas, Chief Economist of account firm RSM, interpreted the Federal Reserve’s message from the December policy meeting as forecasting a soft landing, full employment, and an intention to reduce the federal funds policy rate by at least 75 basis points in 2024. This announcement was well-received by the investment community, policymakers, and the public.
The CNN Business Fear & Greed Index, reflecting market sentiment, shifted from “fear” to “greed” territory, showcasing a significant shift in investor confidence compared to just a month ago.
Federal Reserve’s Interest Rates:
In response to the Fed’s easing interest rate forecast, Treasury yields dropped to their lowest level since August, with the 10-year Treasury yield falling by about two tenths of a percentage point to 4.018%.
Oil prices experienced a more than 1% increase after Fed officials hinted at imminent rate cuts, providing relief following concerns that had pushed both Brent and WTI benchmarks to their lowest levels since late June.
Federal Reserve ENDS Rate Hikes, Prices Fall, Massive Pivot Ahead!
In the corporate arena, Etsy shares fell 2.2% due to an announced 11% staff reduction, citing a challenging economic environment. Tesla, despite losing consumer tax credits and issuing a recall for autopilot issues, saw its shares rise by nearly 1%. Conversely, Pfizer faced a 6.7% decline after issuing weaker-than-expected guidance for 2024.
Looking ahead, economic data releases on Thursday, including weekly jobless claims, November’s retail sales and imports data, and October’s business inventories report, will be closely monitored by investors. The market rally over the past six weeks, coupled with the Federal Reserve’s recent comments, has led experts to believe in a justifiable move in equities, although potential risks in 2024 remain a consideration.
