The S&P 500 and the Nasdaq Composite, both gained for the third day in a row on Wednesday to end at a record high after the US Federal Reserve's latest policy announcement and the May inflation data pointing to easing pricing pressures.
The S&P 500 jumped 0.8% to close above the 5,400 mark for the first time, while the Nasdaq gained 1.5% and is nearing the mark of 18,000. However, the Dow Jones ended in the red, ending with modest losses.
On expected lines, the US Federal Reserve kept interest rates unchanged but noted "modest further progress" towards their 2% inflation goal. Their latest projections show the central bank cutting interest rates only once for the rest of the year, down from three at the start of 2024. Fed officials forecast more cuts for 2025. Yet, the street is penciling in rate cuts in both November and December.
The CPI for the month of May was unchanged, lower than the Dow Jones estimate of a 0.1% increase month-on-month. The gauge increased 3.3% year-on-year, which was also below estimates and slowing from the prior 3.4% increase. Monthly and yearly numbers for core CPI, which excludes the volatile prices associated with energy and food, were also lower than anticipated.
Gains were led by big tech with Tesla and Nvidia surging over 3.5% each. Oracle Corp., after a strong earnings performance, surged 13%. The 10-year treasury yield fell nine basis points to 4.32%.
“Don’t put the cut before the horse,” said Bank of America Corp.’s Michael Gapen. “This Fed will be reactionary and will ease when the inflation data allow.”
Gapen retained his view for the first rate cut in December and a gradual easing cycle that ends with a terminal rate of 3.50-3.75%.
To Krishna Guha at Evercore, the Fed chair is keeping the door very much open to a September cut — provided that the May downshift is broadly sustained in the next few months.
“Powell’s presser fine-tunes to a 1.5 cut signal — we still see thin baseline of two,” he noted.
Also Read: US Fed Meeting Highlights: Fed holds rates steady, signals only one rate cut expected this year (With Inputs From Agencies.)