Dow Jones Hits All-Time Highs as Investors Cheer Fed's Interest Rate Outlook


The Dow Jones Industrial Average rose to close above 37,000 points for the first time as investors cheered a statement by the Federal Reserve on Wednesday that it may cut its reference interest rate next year.

The blue-chip index jumped 512 points, or 1.4%, to end the day at 37,090, surpassing its previous high of 36,799 in early 2023. The broader S&P 500 rose 1.4% and is up 1 .9% of his own record. The technology-heavy Nasdaq composite added 1.4%.

Federal Reserve officials also left their short-term rate unchanged for the third straight meeting amid signs their aggressive push to rein in inflation is working. With the price increases that hit Americans during the pandemic now receding in earnest, Federal Reserve Chairman Jerome Powell said at a news conference that the federal funds rate is projected to fall to 4.6. % by the end of next year, from its current range of 5.25%. at 5.5%.

“The Fed's decision was more dovish than expected on a variety of fronts, including recognition that both growth and inflation have cooled, strong signals that rate hikes are over, and Powell's admission during the press conference that 'rates are at or near their peak,'” analyst Adam Crisafulli of Vital Knowledge said in a report.

Lower interest rates reduce borrowing costs for consumers and businesses, boosting spending and broader economic growth. Interest rate cuts also tend to boost riskier assets, including stocks. Markets have been rising steadily since October, as Wall Street bet that the Federal Reserve, which raised rates 11 times during the last tightening cycle to their highest level in 22 years, will resort to cuts in 2024.

While noting that the Fed is not ready to declare victory over inflation, Powell also said that Fed officials do not want to wait too long before cutting the federal funds rate.

“We are aware of the risk of waiting too long” before cutting rates, he said. “We know it's a risk and we're very focused on not making that mistake.”

Inflation remains stable in the latest consumer price index report 03:16

General inflation in the US November fell as gas prices fell. The Consumer Price Index rose 0.1% last month, up 3.1% from a year ago, according to the Labor Department. reported on Tuesday. The so-called core CPI, which excludes volatile food and energy costs, rose 0.3% after a 0.2% increase in October and was up 4% from a year ago. The Federal Reserve targets annual inflation of 2%.

Following the release of the Federal Reserve's rate projections, Wall Street traders increased their bets on cuts in 2024. Most of those bets now expect the federal funds rate to end next year in a range of 3. 75% to 4%, according to CME data. Cluster.

“We see modest improvement for US equities from current levels,” David Lefkowitz, head of equities CIO at UBS, told investors in a research note. “Both sentiment and positioning have improved, posing greater downside risks if there are negative economic or earnings surprises.”

—The Associated Press contributed to this report.

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