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U.S. stock indexes jumped Wednesday after the Federal Reserve kept rates steady and mapped out a fresh path for rates in 2024. Chairman Jerome Powell said rates likely have peaked in this cycle at a press conference.
How stock indexes are trading
The Dow Jones Industrial Average
DJIA
jumped 359 points, or 1%, to 36,940. Any close above 36,799.65 will mark a new record high.
The S&P 500
SPX
was 45 points higher, or 1%, to 4,687.
The Nasdaq Composite
COMP
was up 132 points, or 0.9%, to near 14,651, after earlier turning negative.
On Tuesday, the Dow Jones Industrial Average rose 0.5%, while the S&P 500 increased 0.5% and the Nasdaq Composite gained 0.7%.
What’s driving markets
The Dow Jones Industrial Average eclipsed the 37,000 mark intraday for the first time on record on Wednesday, after the Fed held its short-term policy rate unchanged at a range of 5.25% to 5.50%, but signaled that a pivot to rate cuts could be in the cards for 2024.
The Dow also was headed for its first record close in about two years, according to FactSet data, as all three major indexes jumped more than 1% in afternoon trading.
“It’s a party,” said Kathy Jones, chief fixed-income strategist at the Schwab Center for Financial Research, of the reaction in the markets. “We are pivoting.”
While the Fed’s range of expected rate cuts isn’t set in stone, the new “dot plot” signals a greater consensus around the potential for three 25-basis-point rate cuts next year, Jones said.
Chairman Jerome Powell said at an afternoon press conference that he believes the central bank’s policy rate now is at or near a peak. But he also said inflation data will be closely watched, and that the Fed is focused on not keeping rates too high for too long.
Fed rate decision: Live coverage of FOMC meeting, dot plot and Powell press conference
“The Fed will wrap up its year with a slight sense of satisfaction, as core PCE inflation has decreased from its peak of 6.6% to 4% without a major slowdown in the economy or sharp rise in unemployment,” said Whitney Watson, global co-head and co-chief investment officer of fixed income at Goldman Sachs Asset Management, in emailed comments.
Traders on Wednesday were pricing in a nearly 57% probability that the Fed will deliver its first quarter-point rate cut in March, according to the CME FedWatch Tool. In recent weeks, expectations for the first cut had been largely pushed back to May.
The European Central Bank and the Bank of England also are due to give policy updates this week.
The 10-year Treasury yield
BX:TMUBMUSD10Y
was falling about 15 basis points to just above 4% on Wednesday, after hitting a 16-year peak of 5% in October.
There continues to be concern about falling benchmark rates that lead to easing financial conditions, a threat to the Fed’s goal of bringing inflation down to its 2% annual target.
“Financial conditions are a lot looser and this is going to demand an explanation,” said Erik Weisman, chief economist at MFS Investment Management, in an interview.
See: Fed will try to ‘Keep calm and carry on’ amidst talk of steep rate cuts and recession
In economic data, U.S. wholesale prices were unchanged in November in another sign of gradually easing inflation, the Bureau of Labor Statistics said Wednesday. Economists polled by the Wall Street Journal had forecast a 0.1% increase in the producer-price index.
Demand for mortgages surged this week, fueled by a drop in the 30-year fixed mortgage rate, with some brokers quoting rates below 7%.
Companies in focus
LifeMD Inc.’s stock
LFMD,
-5.68%
was down 4.3% Wednesday after the virtual primary-care provider said it’s teaming up with Medifast Inc.
MED,
-9.52%
to create a clinically supported weight-management program that will include the new class of weight-loss drugs called GLP-1 receptor agonists.
Pfizer Inc.’s stock
PFE,
-6.93%
fell 7% after the drug company set its 2024 revenue and profit forecast below Wall Street expectations.
Tesla Inc.’s stock
TSLA,
+0.57%
turned 1.1% higher Wednesday after news that the electric-vehicle company was recalling more than 2 million vehicles due to Autopilot control issues.
—Jamie Chisholm contributed
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