- Stocks surged on Wednesday as the Fed affirmed its outlook for three rate cuts later this year.
- Major indexes rose, with the S&P 500 surpassing 5,200 for the first time ever.
- Investors are ramping up bets that the Fed could issue its first rate cut by June.
US stocks surged on Wednesday, with the S&P 500 notching a fresh record as investors took in the Federal Reserve's latest policy guidance on rate cuts to come this year.
The S&P 500 closed above 5,200 for the first time and the Dow Jones Industrial Average soared almost 400 points to notch a new all-time high. The Nasdaq Composite ended more than 1% higher.
Fed officials kept interest rates steady at 5.25%-5.5%, as markets had been broadly anticipating.
Officials also reiterated guidance via the dot plot that three 25 basis-point rate cuts could come later in 2024, assuming inflation continues its downward path.
"We are strongly committed to returning inflation to our 2% objective," Fed Chair Jerome Powell said in prepared remarks Wednesday afternoon. "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," he later added.
Investors ramped up their bets following the meeting that the Fed could issue the first rate cut by mid-year. Markets are now pricing in a 73% chance the Fed could cut rates at least once by the end of June, according to the CME FedWatch tool.
"The FOMC has stuck to its view that the underlying inflation picture is improving, notwithstanding the disappointing numbers in the past two months," Ian Shepherdson, the chief economist of Pantheon Macroeconomics, said in a note on Wednesday. "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," Bryce Doty, the vice president of Sit Investments Associates, added 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."
Here's where US indexes stood at the 4:00 p.m. closing bell on Wednesday:
- S&P 500: 5,224.62, up 0.89%
- Dow Jones Industrial Average: 39,512.13, up 1.03% (+401.37 points)
- Nasdaq Composite: 16,369.41, up 1.25%
Here's what else happened today:
- The US has an 85% chance of avoiding a recession in the next year, according to Goldman Sachs' chief economist.
- A sharp rise in immigration explains why the labor market is so loose and the housing market is so tight, JPMorgan said.
- The mortgage rate "lock-in effect" could worsen wealth inequality and last for years, government researchers say.
- Redditors say they're not interested in Reddit's up-to-$748 million IPO.
- Here are four possible November election outcomes -- and how they will impact stocks, according to UBS.
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil dipped 1.95% to $81.84 a barrel. Brent crude, the international benchmark, dropped 1.4% to $86.15 a barrel.
- Gold traded about flat at $2,158.66 per ounce.
- The 10-year Treasury yield fell one basis point to 4.281%.
- Bitcoin rose 0.59% to $64,331.