All three major U.S. stock indexes advanced in a broad rally which placed them on track for weekly gains.
The S&P 500 and the Nasdaq are now within a hair’s breadth of all-time closing highs, and as the seconds ticked down to the closing bell, it looked as if those records could be reached.
“Clearly, the pull forward of rate cuts into 2025 is one of the more significant factors” of the market’s price action, says Bill Northey, senior investment director at U.S. Bank Wealth Management, Billings, Montana. “Expectations now point to three rate cuts this year.”
Bank stocks outperformed after the Fed unveiled a proposal to relax its leverage rules, which would ease the capital that big banks are required to hold against relatively low-risk assets.
The S&P 500 banks index advanced 1.6%. “This administration came in promising deregulation,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “And this is not just an example of that, but kind of a signpost that there could be more to come.” Richmond Fed President Thomas Barkin cautioned against taking options off the table amid ongoing economic uncertainty, but added that he did not expect tariffs to be “as inflationary as a lot of people worry about.”
A muted tariff effect could help make the case for a rate cut this fall, according to San Francisco Fed President Mary Daly. Boston Fed President Susan Collins said on Wednesday she’s leaning toward a rate cut later this year amid an uncertain economic outlook.
These remarks follow Fed Chair Jerome Powell’s two-day congressional testimony, at which he reiterated the central bank’s wait-and-see policy stance with respect to rate cuts and economic tariff effects.
Financial markets are currently pricing in nearly a 21% likelihood of a 25 basis point reduction the Fed Funds target rate at the July Fed meeting, and more than a 75% probability that this year’s first rate cut will come in September, according to CME’s FedWatch tool.
“As we look at economic data, including the labor market, economic activity and price levels, we see that some additional easing is appropriate through the end of this year,” Northey added. “The question remains around both magnitude and importantly timing of the first cut.”
Last week, the Fed released its updated Summary of Economic Projections, which showed policymakers anticipate cutting the key policy rate by about half a percentage point by year-end.
A spate of economic data showed first quarter GDP contracted more than previously reported due to weaker than expected consumer spending, while ongoing jobless claims reaching multi-year highs, suggesting potential cracks appearing in the labor market.
On the other hand, new orders for durable goods and pending home sales provided robust surprises to the upside.
The Dow Jones Industrial Average rose 404.41 points, or 0.94%, to 43,386.84, the S&P 500 gained 48.86 points, or 0.80%, to 6,141.02 and the Nasdaq Composite gained 194.36 points, or 0.97%, to 20,167.91.
Among the 11 major sectors of the S&P 500, communication services enjoyed the largest percentage gains, while real estate was the biggest laggard.
Micron forecast better-than-expected fourth quarter revenue late Wednesday. Even so, the tech firm’s shares dropped 1.0%.
Copper prices jumped to a three-month high, boosting miners Freeport-McMoRan FCX.N and Southern Copper SCCO.N by 6.8% and 7.8%, respectively.
Advancing issues outnumbered decliners by a 4.76-to-1 ratio on the NYSE. There were 338 new highs and 66 new lows on the NYSE.
On the Nasdaq, 3,128 stocks rose and 1,359 fell as advancing issues outnumbered decliners by a 2.3-to-1 ratio.
The S&P 500 posted 29 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 79 new highs and 67 new lows.
Volume on U.S. exchanges was 16.22 billion shares, compared with the 18.10 billion average for the full session over the last 20 trading days.
