US close: Stocks rise as Fed holds interest rates

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Micron Technology Inc.

$101.73

13:05 04/11/24

2.01%

$2.00

Wall Street stocks finished Wednesday's trading session on a positive note following the Federal Reserve's decision to maintain interest rates, aligning with market expectations.

Signet Group Plc Adr

$91.17

11:10 04/11/24

-0.96%

-$0.88

The Dow Jones Industrial Average rose 1.03% to 39,512.13 points, while the S&P 500 climbed 0.89% to 5,224.62, and the Nasdaq Composite saw gains of 1.25% to settle at 16,369.41.

In currency markets, the dollar was last down 0.06% on sterling to trade at 78.16p, while it decreased 0.13% against the euro to 91.44 euro cents.

Against the Japanese yen, the greenback depreciated 0.4% to change hands at JPY 150.66.

“In milestone-setting fashion, the S&P 500 surged past the 5,200 mark on speculation that the conclusion of the most aggressive Federal Reserve hiking cycle in a generation will continue to bolster corporate America's profit margin,” said SPI Asset Management managing partner Stephen Innes.

“Notably, the gains were widespread, with laggards in catch-up mode as traders now perceive higher chances of an initial rate cut occurring in June.

“Despite the recent uptick in inflation, Fed officials maintained their projection for three rate cuts this year and indicated a shift towards slowing the pace of reducing their bond holdings.”

Innes said that suggested officials interpreted seasonal factors as driving this year’s inflationary pressures.

“While Jerome Powell reiterated the Fed's desire to see more evidence of price decreases, he also noted that it would be appropriate to begin easing policy ‘at some point this year’.

“While the economic projections released after the meeting appeared slightly more hawkish than those from December, the adjustments were not overly alarming as both investors and the Fed still generally agreed on the “right” amount of marginal easing for this year.”

Fed holds interest rates, adjusts economic forecasts

At the top of the economic agenda was the Federal Reserve, after it opted to maintain interest rates at current levels while slightly adjusting its forecasts for economic growth and interest rates in 2025 and 2026.

In a statement from the Federal Open Market Committee (FOMC), the central bank emphasised the importance of gaining greater confidence in inflation moving towards the targeted 2% before considering any adjustments to the interest rate.

According to the Summary of Economic Projections (SEP), top Fed officials revised their forecast for US gross domestic product (GDP) growth to 2.1% for 2024, a faster pace compared to the previously anticipated 1.4%.

Furthermore, projections indicated that inflation, as measured by the core price deflator for personal consumption expenditures (PCE), was expected to gradually return to the 2% target, with a forecast of 2.6% for the current year.

That adjustment came after a December projection of 2.4% for core PCE prices.

The median projection for the Fed funds rate at the end of 2024 remained unchanged at 4.6%, but it was now anticipated to decline to 3.9% by the end of 2025 and to 3.1% by the end of 2026, differing from previous estimates of 3.6% and 2.9% for those respective years.

Elsewhere, the UK saw a slight easing of inflation in February, according to data from the Office for National Statistics.

The consumer price index (CPI) dropped to 3.4% from January's 4%, slightly lower than the expected 3.5%, edging closer to the Bank of England's 2% target.

That marked the lowest level of inflation since September 2021, with significant contributions from decreases in food, restaurants, and cafes, partially offset by increases in housing, household services, and motor fuels.

Chip companies in the green, Signet Jewelers tumbles

In equity markets, chipmakers were in focus, with Micron Technology jumping 2.39% following an unexpected shift to profitability.

The company's outlook also far exceeded consensus views.

Intel managed gains of 0.36%, fuelled by news of its expected receipt of billions of dollars in federal funding through the bipartisan Chips and Science Act.

Chewy leapt 6.35% after a surprise profit announcement for the quarter, although the pet products retailer expressed caution about its prospects for the year ahead.

On the downside, Signet Jewelers tumbled 12.08% on the back of a surprise drop in same-store sales for the current quarter, driven by a decrease in marriage engagements at the start of the year.

Reporting by Josh White for Sharecast.com.

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