Wall Street experienced a surge on Wednesday as the Federal Reserve signaled an end to interest rate hikes, with the Nasdaq leading the gains with a 1.6% increase. The decision to keep interest rates unchanged, along with comments from Fed Chair Jerome Powell, fueled investor optimism that rate hikes were no longer on the horizon.
During a press conference, Powell stated that policymakers would proceed cautiously, acknowledging that they were not yet confident that financial conditions were restrictive enough to achieve the desired level of inflation. However, he left the door open for potential future rate hikes.
Initially, there was some volatility in the markets at the start of Powell’s conference. However, after about 20 minutes, the major equity indexes began to recover and eventually reached session highs. Investors noted that Powell’s tone was less assertive about higher-for-longer rates compared to previous press conferences.
Several market experts interpreted Powell’s comments as suggesting that the bar for rate hikes had become higher. While there still remains a potential risk for future rate increases, this sentiment echoed in the market as Powell’s remarks were perceived as less convincing.
The Dow Jones Industrial Average rose by 0.67% or 221.71 points, closing at 33,274.58. The S&P 500 gained 1.05% or 44.06 points, ending at 4,237.86. The Nasdaq Composite saw the largest increase, rising by 1.64% or 210.23 points to reach 13,061.47.
Among the sectors in the S&P 500, only two experienced losses. Energy fell by 0.3%, and consumer staples dipped by a marginal 0.06%. The gainers were primarily rate-sensitive sectors, with information technology rising by 2% and communications services increasing by 1.8%.
In terms of individual stocks, Advanced Micro Devices saw a significant jump of almost 10% after the company provided an upbeat sales forecast for chips used in artificial intelligence. This positive outlook reflects progress in AMD’s efforts to catch up with market leader Nvidia.
Prior to the Fed’s announcement, falling bond yields had already provided a boost to the stock market. The US Treasury Department’s decision to slow the pace of increases in longer-dated debt auctions in the November-January quarter, coupled with the expectation of an additional quarter of increases, alleviated some concerns.
Earnings season has been a mixed bag for stocks, with a majority of companies beating analyst expectations while still disappointing some investors. According to LSEG’s latest update, approximately 79.7% of the 310 S&P 500 companies that had reported surpassed estimates for the quarter. Conversely, 16.1% fell short.
However, specific companies faced significant downturns due to their revised outlooks. Estee Lauder’s shares tumbled by 18.9% after the cosmetics manufacturer reduced its annual profit forecast. Similarly, Paycom Software’s stock sank by 38.5% as the payroll processor projected downbeat fourth-quarter revenue.
Match Group, the owner of Tinder, also experienced a decline of 15.3% following a fourth-quarter revenue forecast that fell below estimates.
Overall, advancing issues outnumbered declining ones on both the NYSE and Nasdaq. The S&P 500 recorded seven new 52-week highs and 30 new lows, while the Nasdaq Composite had 24 new highs and 297 new lows.
With 11.20 billion shares changing hands, trading on US exchanges was brisk compared to the average of the last 20 sessions, which stood at 10.67 billion.
In conclusion, Wall Street saw significant gains as the Federal Reserve signaled an end to rate hikes, with the Nasdaq leading the charge. Powell’s remarks struck a cautious tone, suggesting that while rate hikes remained a potential future option, the threshold for implementing them had become higher. The stock market’s positive response and surge in certain sectors reflect the prevailing investor optimism. However, individual companies experienced stock price fluctuations as quarterly earnings reports presented mixed results.