Stocks hit record highs on news that the Fed maintained its "three rate cuts this year" outlook, while crypto markets rallied.
On the New York Stock Exchange (NYSE), the Dow Jones 30 industrial average closed up 401.37 points, or 1.03%, at 39,512.13, while the Standard & Poor's 500 index rose 46.11 points, or 0.89%, to 5224.62. The tech-heavy Nasdaq Composite Index gained 202.62 points, or 1.25%, to close at 16,369.41. The three major indexes hit record closing highs for the day.
The Federal Reserve concluded its two-day meeting of the Federal Open Market Committee (FOMC), leaving its benchmark interest rate unchanged at 5.25% to 5.50%. In its dot plot, the Fed maintained its expectation of three rate cuts this year, as it did at the end of last year. At the post-meeting press conference, Fed Chairman Jerome Powell emphasized that the Fed could keep rates at current levels for longer if necessary, but did not rule out a rate cut at any meeting. He also stated that despite higher than expected inflation data earlier in the year, the big picture has not changed. Powell also said that it would be appropriate to begin tapering the pace of quantitative tightening (QT) sooner rather than later.
The stock market reacted positively to the FOMC's decision. It confirmed the Fed's willingness to cut rates even as the economy continues to expand faster than expected. "Powell didn't try to ignore the data, but he gave the market a reason to ignore the data," said Alex Cuffey, chief trading strategist at TD Ameritrade. "Powell didn't turn completely dovish, but he was more dovish than the market has been recently," he said. "The Fed expects the economy to grow more strongly over the next few years, but is still looking to normalize, or lower, interest rates," said Sonu Varghese, global macro strategist at Carson Group. "This is an optimistic outlook, especially since higher nominal growth means more earnings growth even as interest rates fall."
Sector-wise, nine of the 11 sectors in the S&P500, excluding energy and health care, were higher. Among them, consumer discretionary and communication services were up 1.45% and 1.26% respectively, while technology was up 1.15%. Top gainers included Chipotle, up 3.42% after announcing a 50:1 stock split, and Finduoduo, up 3.52% after more than doubling its revenue last quarter on the back of the Temu craze.
Artificial intelligence (AI) giant Nvidia was up 1.09% on the day, while Intel was up 0.36% on news that the U.S. government will give the company $20 billion in subsidies. Treasury rates fell. In the New York bond market, the yield on the 10-year Treasury note was 4.271% at 3 p.m., down 2.5 basis points (1 basis point = 0.01 percentage point) from the previous day. The two-year note, which is sensitive to interest rates, fell 8.8 basis points to 4.604%. Bond yields are moving in the opposite direction of prices.
The U.S. dollar was range-bound. The dollar index, which tracks the greenback against a basket of six major rivals, was at 103.39, down 0.04% from the previous day. The euro/dollar was up 0.50% at $1.0922 and the dollar/yen was up 0.24% at 151.22 yen. International oil prices fell. West Texas Intermediate (WTI) crude for April delivery settled at $81.68 per barrel on the New York Mercantile Exchange (NYMEX), down $1.79, or 2.1%, from the previous day. May crude, which trades for near-month delivery starting tomorrow (Nov. 21), slipped $1.46, or 1.8%, to $81.27.
Brent crude for May delivery on the ICE Futures exchange in London fell $1.43, or 1.6%, to $85.95 a barrel. Gold prices were slightly higher. On the New York Mercantile Exchange (COMEX), gold futures settled at $2161.00 per troy ounce, up 0.1% from the previous day. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), often referred to as "Wall Street's fear gauge," fell 5.72% from the previous day to 13.03.
Meanwhile, crypto markets rallied in unison. Four hours after the FOMC rate announcement, Bitcoin is trading above $67.5k, just above the $60k mark and challenging the $70k mark. Ethereum is also on the rebound, hovering around $3.5k.
