Stocks pop following news that Fed sees 3 rate cuts in 2024
The major averages jumped upon the Federal Reserve’s announcement that three rate cuts are ahead in the new year.
The Dow Jones Industrial Average leapt more than 170 points or nearly 0.5% on Wednesday afternoon. The S&P 500 added 0.5%, and the Nasdaq Composite jumped 0.4%.
–Darla Mercado
Federal Reserve keeps interest rate steady for a third consecutive time
Central bank policymakers have decided to hold the benchmark borrowing rate steady at a range between 5.25% to 5.5%.
The move was widely expected by markets.
Read more about the Fed’s decision here.
–Darla Mercado
Where markets are before the Fed’s decision
The major averages are little changed in the run-up to the Federal Reserve’s announcement.
The S&P 500 is up 0.04%, while the Dow Jones Industrial Average is up 0.02%, as of 1:50 p.m. ET. The Nasdaq Composite is down 0.04%.
The 2-year Treasury yield is at 4.674%, hovering near its session low of 4.670%. The 10-year yield is also near its session low, trading at 4.164%.
The Dollar index is at 103.93, approaching its high of the session of 104.031.
–Darla Mercado, Gina Francolla
Don’t get your hopes up on big rate cuts in 2024, says Wells Fargo Investment Institute
Market participants are getting a little too excited about the prospect of sizeable rate cuts in the new year, according to Wells Fargo Investment Institute’s Scott Wren.
“The market is pricing in around 125 basis points of Federal Reserve cuts by the end of next year,” wrote the senior global market strategist in a note on Wednesday.
“That is overly optimistic in our opinion,” he said. “We do not think the Fed will deliver what the markets are pricing in.”
Instead, Wren anticipates the target range will end 2024 between 4.75% and 5%. Currently, the target rate is between 5.25% and 5.5%.
“Some progress on inflation has been made, and the labor market and the economy are gradually slowing,” Wren said.
–Darla Mercado
Fed’s dot plot could steal the show on Wednesday
The Federal Reserve’s move to hold rates steady for a third time isn’t the main event on Wednesday.
Instead, market participants are eager to see where the central bank stands on its projections for interest rates going forward.
That means the dot plot – the Fed’s grid of individual members’ outlook on interest rates – will be a key focus for traders.
The chart will likely show that the central bank dropped an expected rate hike for 2023, but what’s up in the air is the outlook for 2024 and beyond.
Read more about what investors are watching in the Fed’s announcement.
–Darla Mercado, Jeff Cox
Read the full article here
