Fed talk boosts stocks

By: Gerry Sparrow

Stocks posted their best week of the year, sparked by news that the dovish Fed decided to keep rates steady and signaled three rate cuts were still possible this year.

Stocks Bounce Back

As widely expected, the Fed left rates unchanged at the conclusion of its two-day meeting. But somewhat less expected, the Fed signaled its inclination to cut interest rates three times this year—each time by a quarter percentage point. That was a positive surprise for some, who worried that recent hot inflation reports would cause the Fed to reconsider its stance.¹

Markets pushed higher Wednesday following the news, with all three averages closing at record highs. The rally continued through Thursday, boosted further by news that existing home sales rose 9.5 percent in February.^2,3

The week’s rally was broad-based overall, with 10 of the 11 S&P 500 sectors posting gains (health care dropped slightly). At one point late in the week, nearly one in four S&P 500 stocks were trading at 52-week highs. That was the highest proportion in three years, which supports the idea that the rally was broadening out from mega-cap tech stocks.⁴

Turning Point

The Federal Open Market Committee’s decision marks a turning point as the Fed signaled that its target range of 5.25 to 5.50 percent has topped out. That target range, in place since late last year, is the highest level in 23 years.

“We believe that our policy rate is likely at its peak for this type of cycle,” said Fed Chair Powell at the post-meeting press conference. He added that if the economy keeps on its current course, that the FOMC would likely “begin dialing back policy restraint at some point this year.” If the FOMC votes to ease it at its June meeting, it would be the first cut in four years.^4,5

PHOTO CREDIT :https://www.shutterstock.com/g/chanawut13

Via SHUTTERSTOCK

Footnotes and Sources

^{1. The Wall Street Journal, March 22, 2024}

^{2. CNBC.com, March 20, 2024}

^{3. Sectorspdrs.com, March 22, 2024}

^{4. MarketWatch.com, March 22, 2024}

^{5. The Wall Street Journal, March 21, 2024}

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