Stocks surged on Wednesday as investors responded positively to the Federal Reserve’s decision to keep interest rates steady and its forecast of two rate cuts in 2025. The S&P 500 made notable progress, recovering more ground from the recent market downturn, which had briefly pushed the index into correction territory.
Market Performance
The Dow Jones Industrial Average gained 383.32 points, or 0.92%, closing at 41,964.63.
The S&P 500 jumped 1.08%, finishing the day at 5,675.29.
The Nasdaq Composite advanced 1.41%, closing at 17,750.79.
Fed’s Decision and Economic Outlook
The Federal Reserve kept the federal funds rate at a range of 4.25% to 4.5%, a move widely anticipated by the market. The central bank maintained its forecast of two rate cuts later this year, acknowledging that “uncertainty around the economic outlook has increased.”
During a press conference following the decision, Fed Chair Jerome Powell emphasized the strength of the U.S. economy, stating, “The economy is strong overall and has made significant progress toward our goals over the past two years.” He also noted that while labor market conditions remain solid, inflation is still somewhat above the Fed’s 2% long-term goal.
Market Reaction to Fed’s Outlook
Investors reacted positively to the Fed’s forecast for rate cuts and Powell’s assertion that the economy remains strong. Powell also suggested that any inflationary effects from tariffs would likely be short-lived.
Michael Green, Chief Strategist at Simplify Asset Management, told CNBC, “The most important thing to recognize is that the information that came across was almost exactly what people had expected.” He highlighted the seasonality patterns of inflation over the past two years, noting weaker inflation in summer and stronger inflation in winter and spring.
Rising Trade Tensions and Tariffs
The Fed’s decision came amid rising trade tensions between the U.S. and several major trade partners. Earlier this month, President Donald Trump imposed tariffs on goods from Canada, Mexico, and China. Both Canada and China have retaliated with their own duties. Additionally, Trump’s temporary tariff exemptions for some imports from Canada and Mexico are set to expire on April 2.
Market Volatility and Recent Declines
Despite the rally on Wednesday, the market has faced significant volatility. On Tuesday, the market experienced a sharp sell-off, undoing gains from previous sessions. As of now, both the Dow and S&P 500 are more than 6% and 7% below their recent closing highs, respectively, while the Nasdaq is about 12% off its record high.
Related topics:
