US close: Stocks surge, Dow hits record on rate-cut hopes

US stocks surged on Wednesday after the Federal Reserve opened the door to three interest-rate cuts in 2024, with the Dow Jones Industrial Average finishing at its highest closing level in history.

After a tentative start, with markets mostly flat for most of the session, Wall Street's three main indices surged ahead at 1400 ET after the conclusion of the Federal Open Market Committee's two-day meeting in Washington.

The Dow, S&P 500 and Nasdaq all finished 1.4% higher, with the Dow closing at 37,090.24, topping the 37,000 mark for the first time ever, with just two stocks on the index in the red.

The Fed chose to keep the federal funds rate at the 5.25-5.5% level, as widely expected by markets. But the committee noted that economic activity had "slowed" in the fourth quarter, with job gains moderating and the rate of inflation easing.

Accordingly, the so-called dotplot graph – which shows individual policymakers' expectations each quarter of where they think interest rates will be over the coming few years – shows rates ending 2024 at the 4.625% median average level. This implies three separate 25 basis-point cuts before the end of next year, compared to just two cuts in September's dotplot.

In the news conference that followed the decision, Fed chair Jerome Powell said: "No one is declaring victory [on inflation]. That would be premature." However, he acknowledged that rate cuts were "clearly [...] a topic of discussion".

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the FOMC's acknowledgement of an economic slowdown and easing inflation "effectively drops the tightening bias, though without specifically saying 'we’re done'." He said: "The Fed is catching up with the reality that the credibility of its threats to hike again has been near-zero in markets for some time now."

In other news, US mortgage applications surged by 7.4% in the week ending 8 December, according to the Mortgage Bankers Association of America, marking a sixth consecutive increase and pushing applications to their highest level in more than four months, mostly due to a continuous decline in interest rates.

Meanwhile, wholesale prices were held in check last month by a drop in energy costs, with producer prices coming in flat month-on-month in November, according to the Labor Department. In annual terms, however, so-called final demand price growth slowed from 1.2% in October to 0.9%. On the goods side of the equation, prices were unchanged on the month, with a 1.2% drop in energy prices offsetting a 0.6% rise in food costs.

Pfizer slumps as annual outlook cut

Shares in Pfizer slumped 7% on Wednesday as the US drugs giant said annual revenue and profit would come in below expectations. Earnings have been boosted in the last two years by sales the Covid-19 vaccine Pfizer makes in partnership with Germany’s BioNTech and its own Paxlovid treatment for the virus, but falling vaccination rates have forced Pfizer to cut jobs and costs in an attempt to save at least $4bn a year.

Annual revenue is now expected be in the range of $58.5bn to $61.5bn compared with the analysts’ average estimate of $63.17bn. The company also forecast adjusted profit in the range of $2.05 to $2.25 per share, lower than analysts’ expectation of $3.16.

Elsewhere in the sector, however, stocks were joining in with the wider market optimism, such as Johnson & Johnson, AbbVie, Eli Lilly and Merck. Vertex Pharmaceuticals shot up 13% after hailing "blockbuster potential" for a pain treatment drug.

Economic bellwether stocks like banks were also performing well, including Goldman Sachs, Citigroup, Wells Fargo and Bank of America, along with Home Depot and Walgreens Boots Alliance. Apple meanwhile gained 2% to hit a record high.

Dow Jones - Risers

Walgreens Boots Alliance, Inc. (WBA) $24.63 7.41%
Home Depot Inc. (HD) $343.40 3.06%
Dow Chemical Co. (DOW) $52.33 2.97%
Goldman Sachs Group Inc. (GS) $362.73 2.87%
Amgen Inc. (AMGN) $281.62 2.78%
Merck & Co. Inc. (MRK) $107.11 2.64%
Caterpillar Inc. (CAT) $267.97 2.50%
American Express Co. (AXP) $174.56 2.06%
Walt Disney Co. (DIS) $92.83 1.93%
Procter & Gamble Co. (PG) $148.62 1.81%

Dow Jones - Fallers

Verizon Communications Inc. (VZ) $36.99 -0.83%
International Business Machines Corporation (CDI) (IBM) $163.62 -0.66%

S&P 500 - Risers

Vertex Pharmaceuticals Inc. (VRTX) $405.07 13.23%
Sl Green Realty Corp. (SLG) $45.46 10.93%
Vornado Realty Trust (VNO) $29.21 10.77%
Revvity, Inc. (RVTY) $98.66 10.31%
Zions Bancorporation (ZION) $41.82 9.68%
Albemarle Corp. (ALB) $140.06 9.47%
Boston Properties Inc. (BXP) $68.09 8.51%
Kohls Corp. (KSS) $27.19 8.21%
Advance Auto Parts (AAP) $60.83 8.14%
Macerich Co (MAC) $14.58 8.00%

S&P 500 - Fallers

Pfizer Inc. (PFE) $26.66 -6.72%
Southwest Airlines Co. (LUV) $29.15 -3.83%
Progressive Corp. (PGR) $160.55 -2.77%
Everest Group (EG) $386.83 -2.35%
Raymond James Fin Corp. (RJF) $107.75 -1.71%
Adobe Systems Inc. (ADBE) $624.26 -1.48%
Unum Group (UNM) $44.68 -1.41%
Best Buy Co. Inc. (BBY) $72.37 -1.15%
Gallagher Arthur J (AJG) $245.21 -0.96%
General Electric Co. (GE) $121.18 -0.93%

Nasdaq 100 - Risers

Vertex Pharmaceuticals Inc. (VRTX) $405.07 13.23%
Illumina Inc. (ILMN) $126.67 7.68%
Walgreens Boots Alliance, Inc. (WBA) $24.63 7.41%
Align Technology Inc. (ALGN) $231.36 6.39%
Paypal Holdings Inc (PYPL) $61.73 4.82%
Qurate Retail Inc. (QRTEA) $0.94 4.75%
DENTSPLY Sirona Inc. (XRAY) $33.33 4.42%
Incyte Corp. (INCY) $64.19 3.77%
Take-Two Interactive Software Inc. (TTWO) $163.12 3.77%
Netflix Inc. (NFLX) $479.98 3.67%

Nasdaq 100 - Fallers

Adobe Systems Inc. (ADBE) $624.26 -1.48%
Trip.com Group Limited (TCOM) $33.48 -1.18%
Baidu Inc. (BIDU) $112.36 -0.70%
eBay Inc. (EBAY) $40.84 -0.66%
T-Mobile Us, Inc. (TMUS) $159.55 -0.55%
Mercadolibre Inc. (MELI) $1,612.16 -0.29%
Vodafone Group Plc ADS (VOD) $8.35 -0.24%
Applied Materials Inc. (AMAT) $156.99 -0.15%
Check Point Software Technologies Ltd. (CHKP) $148.84 -0.06%
Starbucks Corp. (SBUX) $98.11 -0.04%