Wall Street scaled a fresh all-time high on Thursday after the Federal Reserve signaled that it would cut borrowing costs next year.
The Dow Jones Industrial Average closed at a record level for the second consecutive session as investors looked to the end of the Fed’s aggressive campaign against inflation.
The index finished the day up 158 points, or 0.43%, at 37,248.31. Since Joe Biden’s inauguration in January 2021 – when it closed at 31,188.38 – it has climbed more than 19%.
Investors were encouraged by guidance issued by the Fed as it held rates steady at a 22-year high on Wednesday.
As price growth continues to fall back from its highest level in a generation, Jerome Powell, the central bank’s chairman, said the historic tightening of monetary policy was probably over, and that discussions on cuts in borrowing costs were coming “into view”.
Policymakers embarked upon an extraordinary fight to combat inflation last spring, voting to increase the Fed’s benchmark policy rate at 11 out of the 12 subsequent meetings.
The last hike was in July, however, and officials have since opted to wait and see whether they have done enough. Projections released following this week’s Fed meeting revealed that 17 of 19 of its officials expected that the policy rate would be lower by end-2024.
The dovish pivot in the central bank’s statement triggered a rally in equities, with the Dow clocking fresh intra-day record highs on Thursday.
Investors also parsed retail sales data for November, which rose 0.3% on a monthly basis compared with estimates of a 0.1% fall, according to economists polled by Reuters.
Another report showed weekly jobless claims stood at 202,000 for the week ended 9 December, lower than the estimated 220,000.
“The soft landing that many doubted was possible is becoming more realistic every day,” Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska, said. “Inflation is no longer the problem it was and we still have a very healthy consumer, judging by today*s retail sales data.”
Money markets now see a 77.2% chance of at least a 25 basis point rate cut in March 2024, up from about 64.5% before the latest policy decision, while almost fully pricing in another cut in May, according to CME Group’s FedWatch tool.
The benchmark S&P 500 also closed 0.3% higher. The technology-focused Nasdaq Composite rose 0.2%.
Reuters contributed to this report
