Market Milestone: In a notable market development, the Dow Jones industrial average notches its first record closing high since January 2022, marking the end of a prolonged hiatus. The S&P 500 and Nasdaq follow suit, surging over 1% each, propelled by the Federal Reserve’s indication that its interest rate-hiking policy is concluding, foreseeing lower borrowing costs in 2024.
The Fed’s policy statement, aligning with expectations, maintains steady interest rates, triggering a swift and robust market response. Fed Chair Jerome Powell’s remarks during the subsequent press conference further fuel the rally, emphasizing the unlikelihood of further hikes and the Fed’s commitment to avoiding prolonged high rates.
Since March 2022, the Fed has implemented a series of rate hikes, totaling 525 basis points, aimed at curbing inflation. The market’s buoyant response aligns with the Fed’s acknowledgment that inflation is expected to return to normal without inducing a recession.
The Dow’s ascent to an all-time high confirms its bull market status, rallying back from a 20% tumble in September 2022. The day witnesses a widespread market surge, with all major S&P 500 sectors finishing higher. Notably, the rate-sensitive real estate and utilities sectors lead with gains exceeding 3%. The small-cap Russell 2000 index records a substantial 3.5% surge.
Also Read: Fed Signals Policy Shift: Powell’s Optimism Sparks Market Surge
Closing numbers reflect the fervor of the rally: the Dow Jones Industrial Average rises 512.3 points (1.4%) to 37,090.24, the S&P 500 gains 63.39 points (1.37%) to 4,707.09, and the Nasdaq Composite adds 200.57 points (1.38%) to 14,733.96. Both the S&P 500 and Nasdaq achieve fresh closing highs for the year.
Year-to-date figures reveal the resilience of the market, with the S&P 500 up 22.6%, Nasdaq up 40.7%, and the Dow up 11.9%. This sustained rise reflects the prevailing belief that the Fed is pivoting from rate hikes to potential rate cuts in the coming year.
Post the Fed statement, U.S. interest rate futures indicate a 90% probability of a May rate cut, up from 80% before the announcement, according to LSEG’s Fedwatch. Amidst the positive momentum, Pfizer experiences a setback, with shares dropping 6.7% after the drugmaker forecasts 2024 revenue below Wall Street’s expectations.
Market dynamics indicate a strong bullish trend, with advancing issues significantly outnumbering declining ones. Volume on U.S. exchanges surges to 14.35 billion shares, reflecting heightened investor activity. In summary, the market not only celebrates record highs but also embraces a shift in Fed policy, positioning itself for potential rate cuts in the near future.