All three major U.S. stock indexes climbed to fresh closing highs for the year after the FOMC left its fed funds target rate unchanged at 5.25 per cent-5.50 per cent
U.S. stocks soared to a sharply higher close on Wednesday and benchmark Treasury yields slid to their lowest level since August after the Fed flagged the end of its tightening cycle.
All three major U.S. stock indexes climbed to fresh closing highs for the year after the FOMC left its fed funds target rate unchanged at 5.25 per cent-5.50 per cent.
The Dow notched a record closing high, confirming the blue-chip industrial average has been in a bull market since September 30, 2022, by common definition.
In its accompanying statement, the Fed admitted that inflation has dropped and implied that the rate tightening cycle might be over. Its dot plot, which forecasts the potential path forward for monetary policy, signalled that lower borrowing costs could be in the cards next year.
The Fed delivered an early holiday present this year, said Greg Bassuk, CEO at AXS Investments in New York. Investors are embracing change in Fed sentiment toward a more dovish stance. It really emphasises the trade that investors have been making over the last few weeks; that rates are set to drop in the coming year.
Economic data showed U.S. PPI were unchanged in November, further evidence that inflation continues to drop toward the Fed’s average annual 2 per cent target.
Some of the factors we believe that led this change in sentiment is this week’s consumer price index and producer price index data showing more consistency in inflation’s downward trajectory, Bassuk said. This allowed the Federal Reserve to gain greater confidence that its hawkish moves have begun to achieve their objectives.
The Dow Jones Industrial Average added 512.3 points, or 1.4 per cent, to 37,090.24, the S&P 500 advanced 63.39 points, or 1.37 per cent, at 4,707.09 and the Nasdaq Composite gained 200.57 points, or 1.38 per cent, at 14,733.96.
