Wall Street up. Fed signals three rate cuts this year

Luc Williams

The Dow Jones Industrial was up 1.03% at the close. and amounted to 39,512.13 points. The S&P 500 gained 0.89% at the end of the day. and amounted to 5,224.62 points. The Nasdaq Composite rose 1.25%. and closed the session at 16,369.41 points. The Russell 2000 index of small-cap companies gained 1.92%. and amounted to 2,074.88 points. The VIX volatility index fell by 5.64%, to 13.04 points.

“We've had a few spikes in inflation this year, but Jerome Powell isn't batting an eyelid.”

After the meeting on March 19-20, the Fed left interest rates unchanged. in the US unchanged at 5.25-5.50%, but signaled that it plans to cut rates three times before the end of the year, confirming its previous forecast from December. That said, the central bank has indicated it needs more evidence that inflation is moderating before it starts taking its foot off the brakes.

“The Committee does not expect it will be appropriate to lower the target range until it has greater confidence that inflation is trending sustainably towards 2 percent.” – said the central bank. Ahead of the meeting, some investors were concerned that the recent wave of hot inflation reports could potentially result in even fewer cuts than markets expected.

In March, the FOMC forecasts interest rates. at the level of 4.6 percent at the end of 2024, 3.9 percent at the end of 2025 and 3.1 percent at the end of 2026. In December, the Fed forecast that interest rates in the USA they will be at the level of 4.6%. at the end of 2024, 3.6 percent at the end of 2025 and 2.9 percent at the end of 2026.

“We've had a few spikes in inflation this year, but Jerome Powell isn't batting an eyelid,” said David Russell, global head of market strategy at TradeStation. “Investors are relieved to see that the three cuts remain on the dot chart, supporting markets and risk appetite. The Fed may wake up with a hangover, but the punch is far from gone,” he added.

Financial stocks rose after the Fed's decision on hopes that interest rate cuts this year will sustain economic growth. American Express rose 2.8%. Large-cap technology stocks that have fueled the recent market rally have risen as investors bet that the sector has the most to gain from lower interest rates. Alphabet, Amazon, Microsoft and Nvidia rose about 1% each, Meta Platforms gained 1.9%, and recent market laggards Apple and Tesla gained 1.5-2.5% each.

Lowering interest rates in the U.S. will be appropriate at some point this year, Fed Chairman Jerome Powell said during a conference after the Reserve meeting on Wednesday. Powell added that slowing the pace of balance sheet reduction may be appropriate soon.

“We believe our interest rate has likely reached its highest level at this point in the cycle and, if the economy continues to grow broadly as expected, it will likely be appropriate to begin phasing out monetary policy restrictions at some point this year. However, the economic outlook is uncertain and we continue to particular attention to the risk of inflation. If necessary, we are prepared to maintain the current target range longer,” said the Fed chairman.

“Inflation has declined significantly over the past year but remains above target.”

“We know that reducing monetary policy restrictions too quickly or too much could reverse the observed progress on inflation and require policy tightening to bring inflation back to 2 percent. At the same time, reducing monetary policy restrictions too late or too little could unduly impact on employment, taking into account every issue, i.e. the evolution of prospects and the balance of risks,” he added.

“Our long-term goal is to get back to a balance sheet of mostly treasury bonds. Once we get through that, I expect we'll come back to other composition issues and re-examine those issues. That's not urgent right now. We want to take that up first.” decision, and then we will be able – when the time is right – to return to the remaining issues,” he added.

The Fed chairman said that long-term inflation expectations remain well anchored. “Inflation has declined markedly over the past year but remains above our long-term target of 2 percent. Estimates based on the Consumer Price Index indicate that total PCE prices closed at 2.5 percent at the end of February. Long-term inflation expectations remain well anchored, as reflected in a wide range of services, businesses and forecasters, as well as financial market indicators,” the Fed chairman said.

“Our restrictive monetary policy stance has put downward pressure on economic activity and inflation. As economic tensions ease and inflation dynamics continue to decline, our employment and inflation targets are becoming increasingly balanced,” he added.

Shares of the Nasdaq exchange operator fell by 2.5%. after the company announced that Borse Dubai would sell shares in the company worth USD 1.6 billion, reducing its stake to 10.8%. with 15.5 percent Wells Fargo gained 0.5%, although Citigroup downgraded the lender's stock to “neutral” from “buy.”

Boeing gained almost 4%, although Chief Financial Officer Brian West said the planemaker had decided to keep production of its 737 jets below 38 per month.

Super Micro Computer fell 1.5%. after the company that makes AI-optimized servers powered by Nvidia chips announced the per-share price of its IPO of 2 million new shares. PDD Holdings gained 3.5%. after the e-commerce company beat Wall Street estimates for fourth-quarter revenue.

US crude oil inventories last week fell by 1.95 million barrels, or 0.44%, to 445.02 million barrels. Gasoline stocks fell by 3.31 million barrels, or 1.41 percent, to 230.77 million barrels during this time. Reserves of distilled fuels, including heating oil, increased by PLN 624,000. barrels, or by 0.53 percent, to 118.52 million barrels. On the oil market, WTI contracts for April are down by 1.95%. to USD 81.84 per barrel, and May Brent futures fall by 1.32%. up to USD 86.23/b.


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