Wall Street is still buzzing from the Federal Reserve’s surprisingly dovish policy meeting Wednesday. Why are stocks up today?
Well, investors appear to be continuing to respond to Fed Chair Jerome Powell’s suggestion that the central bank will likely cut interest rates several times in 2024. Indeed, according to Fed officials’ estimates, the benchmark rate will fall by around 75 basis points in 2024 to 4.6%, down from the current range between 5.25% and 5.5%.
This comes as something of a change of pace for Powell, who was previously quick to assure economists that the inflation fight was far from over. The Fed Chair had even left the door open for additional rate hikes before this Wednesday’s announcement.
“The Fed delivered the dovish pivot that we expected heading into the December meeting,” Bank of America Chief U.S. Economist Michael Gapen noted on Wednesday. “While we did not expect the Fed to move to an outright easing bias, we did expect it to move to a more balanced reaction function and, in the event, we think it did just that.”
Why Are Stocks Up Today?
The Fed meeting has proven to be a major bullish signal for stocks. Both the Nasdaq Composite and S&P 500 jumped about 1.3% yesterday and were continuing their respective rallies earlier today before a bit of a cooldown.
Indeed, both the Nasdaq and S&P opened in the green before falling back down early in the afternoon for unknown reasons. At the time of this writing, the S&P is barely in the green — up less than 0.1% — while the Nasdaq is actually down 0.1% so far.
Meanwhile, the Dow Jones Industrial Average is trending around its highest level ever after jumping on Wednesday. Unlike the Nasdaq, the Dow is still in the green today as well, up 0.19% as of this writing.
10-year Treasury yields have also been easing since the Fed meeting. The 10-year yield has dropped below 4% for the first time in four months as traders price in impending rate cuts. This has brought 30-year mortgage rates back below 7%.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
