Fed Signals Lower Borrowing Costs in the Future
Wall Street’s main indexes experienced gains on Thursday, driven by tech giant Apple reaching a record high. This followed the Federal Reserve’s announcement on Wednesday, indicating an end to its aggressive rate hike campaign and the potential for lower borrowing costs in the coming year. As expected, the Fed left interest rates unchanged. Chair Jerome Powell stated that as inflation falls at a faster rate than anticipated, discussions on cuts in borrowing costs are on the horizon. Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, noted that investors have a bullish outlook, with expectations for three rate cuts in 2024, exceeding earlier bearish predictions.
Market Reaction to Fed Announcement
Following the Fed’s policy decision, money markets now project an 83.3% chance of at least a 25 basis point rate cut in March 2024, compared to approximately 50% before the announcement. Additionally, there is almost complete pricing in of another rate cut in May, according to CME Group’s FedWatch tool. Investors also analyzed retail sales data from November, which exceeded expectations, showing a 0.3% increase on a monthly basis despite economists previously estimating a 0.1% decline, based on a Reuters poll.
Apple’s Intra-Day Record High
Meanwhile, Apple shares climbed 0.7% and reached an intra-day record high of $199.62, surpassing the peak reached in July. At 9:42am ET, the Dow Jones Industrial Average was up 35.43 points or 0.10% at 37,125.67. The S&P 500 rose by 21.56 points or 0.46% to 4,728.65, while the Nasdaq Composite increased by 92.21 points or 0.63% to 14,826.17.
Sector Performance and Russell 2000 Surge
Among the S&P 500 sectors, ten of the top eleven saw gains, with real estate stocks rising by 2.3%. Additionally, the Russell 2000 index, comprised of small-caps, surged by 2.9% to its highest level since early February.