The Dow Jones Industrial Average closed above 37,000 for the very first time after the U.S. Federal Reserve forecast three interest rate cuts in the coming year.
The Dow rose 512.30 points, or 1.40%, to close at 37,090.24, a record level for the 30-stock index. At its session high, the Dow touched 37,094.85.
Both the S&P 500 and Nasdaq indices also rallied about 1.40% each immediately after the U.S. central bank signaled a pivot away from its monetary tightening regime of the last two years.
All three of the major U.S. stock averages closed at fresh 52-week highs.
The rally came after the U.S. central bank held its benchmark interest rate steady in the 5.25% to 5.50% range as expected but forecast three interest rate cuts in 2024.
Markets had been hoping for the Fed to give a signal that it would start cutting rates next year with recent inflation data showing consumer prices moderating.
The Fed acknowledged that inflation “has eased” over the past year and it lowered its inflation forecast for 2024, seeing a 2.4% rate by the end of next year, down from 2.6% previously.
In speaking to the media after the rate decision, Fed Chair Jerome Powell said: “Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news.”
There’s now hope that the Fed has engineered a “soft landing,” which is when inflation is brought under control without causing an economic recession.
Data earlier this week showed that inflation in the U.S. during November declined to an annualized 3.1%, down from a peak of 9.1% in June 2022. The U.S. Federal Reserve targets inflation at an annualized 2%.
The Dow has now risen 12% in 2023, while the S&P 500 is up 23% and the Nasdaq has gained 42% year-to-date.
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