Closing Market Update: Stocks Gain as Fed Leaves Rates Unchanged

Expectations for three rate cuts in 2024 helped bolster investor sentiment in the wake of the Federal Reserve's March meeting.

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Market action was subdued through midday Wednesday until stocks moved broadly higher in the wake of the Federal Reserve’s March meeting, with the Dow Jones Industrial Average ($DJI), S&P 500 index (SPX), and Nasdaq Composite ($COMP) all moving to new highs.

As expected, the Federal Open Market Committee (FOMC) left benchmark rates unchanged. The post-meeting statement showed no substantial changes since the last FOMC meeting, and the widely watched dot-plot continues to point to three rate cuts in 2024. Some market watchers thought the Fed might signal a bit more hawkish tone after higher-than-expected inflation numbers in January and February were reported.

Instead, in the post-meeting press conference, Fed Chairman Jerome Powell emphasized the need to focus on the Federal Reserve’s dual mandate to support economic growth and keep inflation near its 2% target.

According to Powell, “We believe our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”

At the same time, “The economic outlook is uncertain, however, and we remain highly attentive to inflation risks. We are prepared to maintain the current target range for the federal funds rate for longer if appropriate.”

Markets seemed to find solace in the balanced approach, and the possibility of a rate cut at the June meeting seemed to increase slightly. The CME FedWatch Tool now shows a 62% chance of a quarter-point cut in June, up from 56% late Tuesday.

The yield on the 10-year Treasury note (TNX) was little changed, falling two basis points to 4.27% after coming within striking distance of 2024 highs near 4.35% on Monday. The U.S. dollar fell, and the U.S. Dollar Index ($DXY) lost 0.44 to end at 103.40.

Among widely held stocks, Apple (AAPL) gained 1.5%, Microsoft (MSFT) added 0.9%, Nvidia (NVDA) rose 1.1%, Meta Platforms (META) gained 1.9%, and Amazon (AMZN) gained 1.3%.

Here’s where the major benchmarks ended:

  • The S&P 500 index added 46.11 points (0.9%) to 5,224.62; the Dow Jones Industrial Average gained 401.37 points (1%) to 39,512.13; the Nasdaq Composite rose 202.62 points (1.3%) to 16,369.41.
  • The 10-year Treasury note yield slid two basis points to 4.27%.
  • The Cboe Volatility Index (VIX) fell 0.77 to 13.06.

Health care was the biggest loser among the S&P 500 sectors. Energy was also lower after crude oil prices sank on the heels of weekly inventory data. Brent Crude Oil (/BZ) futures, the global benchmark, dropped 1.6% on the heels of five days of gains.

Communications, financials, and consumer discretionary stocks were among the strongest sectors.

Stocks on the move

The following companies had stock price moves driven by analyst ratings, quarterly results, or other news:

  • Chipotle Mexican Grill (CMG) rallied 3.5% after the company announced a 50-to-1 stock split.
  • Signet Jewelers (SIG) stock lost 12% after the jewelry company reported a sharp drop in fourth-quarter sales numbers.
  • Super Micro Computer (SMCI), which fell Tuesday on reports it intends to sell two million shares of stock, dropped another 1.6%.
  • Intel (INTC) rose 0.4% on reports the chipmaker has been awarded as much as $8.5 billion in funding from the CHIPS Act, which is to encourage U.S. semiconductor production.
  • Boeing (BA) added 3.7% and was the best gainer in the Dow after the plane maker updated its first-quarter cash flow numbers.

On the earnings front, General Mills (GIS) shares moved 1.1% higher after the food company reported earnings and revenues that topped estimates. Five Below (FIVE), Micron Technology (MU), and homebuilder KB Home (KBH) also release results Wednesday after the close. FedEx (FDX), Nike (NKE), and lululemon athletica (LULU) are among the companies reporting Thursday.

On to the economic data

With the FOMC’s March meeting in the history books, focus turns to Thursday’s busy economic calendar.

Existing home sales will be watched after strong housing starts and homebuilder numbers earlier this week. Jobless claims, manufacturing, and leading economic calendars are also due Thursday.

Lastly, the big week for central banks isn’t over yet. The Bank of England and the Swiss National Bank make their interest rate announcements on Thursday.

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