A powerful rally across Wall Street sent the Dow Jones Industrial Average to a record high on Wednesday after the Federal Reserve indicated that the cuts to interest rates investors crave so much may be coming next year.
- The Dow jumped 512 points, or 1.4%, to 37,090.24, surpassing its prior peak of 36,799.65 set at the start of last year.
- The S&P 500 rose 63.39 points, or 1.4%, to 4,707.00 and is within 1.9% of its own record.
- The Nasdaq composite rose 200.57 points, or 1.4%, to 14,733.96.
Wall Street loves lower interest rates because they can relax the pressure on the economy and goose prices for all kinds of investments, from stocks to bonds to cryptocurrencies. Markets have been rallying since October on rising hopes that cuts may be on the way.
Rate cuts particularly help investments seen as expensive, lower quality, or forcing their investors to wait the longest for big growth, the AP reports. Some of Wednesday's bigger winners were bitcoin, which rose nearly 4%, and the Russell 2000 index of small US stocks, which jumped 3.5%. All the excitement came as the Federal Reserve on Wednesday held its main interest rate steady at a range of 5.25% to 5.50%, as was widely expected. It's hiked that rate up from virtually zero early last year in hopes of slowing the economy and hurting investment prices by exactly the right amount: enough to snuff out high inflation but not so much that it causes a painful recession.
With inflation down sharply from its peak two summers ago and the economy still solid despite high interest rates, hopes have been rising that the Fed can pull off that perfect landing. And in a press conference Wednesday, Fed Chair Jerome Powell said its main interest rate is likely already at or near its peak. While acknowledging that the battle against high inflation is still not definitively over, he also said Fed officials don't want to wait too long before cutting the federal funds rate, which is at its highest level since 2001. "We're aware of the risk that we would hang on too long" before cutting rates, he said. "We know that's a risk, and we're very focused on not making that mistake."
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On Wall Street, Vertex Pharmaceuticals jumped 13.2% for the biggest gain in the S&P 500 after it reported encouraging data from a study for a potential pain treatment for patients with diabetic peripheral neuropathy. That helped offset a 6.7% loss for Pfizer, which gave a revenue forecast for 2024 that was weaker than analysts expected. Much of the shortfall was due to expectations for its COVID-19 vaccine and treatment. Southwest Airlines lost 3.8% after it raised its forecast for how much it will spend on fuel costs during the end of 2023.
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