4:18pm: Fed indicates inflation has "eased"
The Dow closed Wednesday up 512 points, 1.4%, at a record 37,090, the Nasdaq Composite jumped 201 points, 1.4%, to 14,734 and the S&P 500 gained 63 points, 1.4%, to 4,707. The small-cap Russell 2000 index rallied 66 points, 3.5%, to 1,948.
The indexes took off after the Federal Reserve indicated that a trio of rate hikes are likely on the way in 2024.
“The question of when will it become appropriate to begin dialing back the amount of policy restraint in place that begins to come into view, and is clearly a discussion topic of discussion out in the world and also of discussion for us at our meeting reading today,” Fed Chair Jerome Powell said at a press conference following the meeting.
2:29pm: Indexes jolt upward
After the Federal Reserve signaled that rate cuts are likely to finally arrive in 2024, the Dow surged 246 points, 0.7%, to 36,824, the Nasdaq Composite gained 100 points, 0.7%, to 14,663 and the S&P 500 jumped 34 points, 0.7%, to 4,678.
The FOMC’s dot plot, which tracks individual members’ expectations, shows an average projection of three rate cuts in 2024, another four cuts in 2025 and three more in 2026. That would bring rates back down to a range of 2%-2.25%.
“I think it’s mostly about inflation here, the tightening or loosening of financial conditions may or may not be appropriate, but as long as inflation is lower, that’s what the Fed is going to respond,” Western Asset portfolio manager John Bellows said, reported by CNBC. “The news on inflation has been good, and I think they’re reflecting that here.”
12:00pm: Stocks ubdued ahead of Fed decision
Stocks in New York were treading water ahead of the outcome of the Federal reserve meeting where attention will focus on the commentary surrounding the timing of interest rate cuts in 2024.
At midday, the Dow Jones Industrial Average was little changed at 36,583.11, the S&P 500 was up 5.06 points, 0.1%, at 4,648.76 and the Nasdaq Composite was up 10.42 points, 0.1%, at 14,543.81.
Craig Erlam at Oanda said: "The final Fed meeting of the year could also be the most eventful, with the central bank likely to acknowledge it's done with tightening and even signal rate cuts next year."
"The question is how many, with markets now pricing in four starting in May."
"The interest rate decision itself will almost certainly be straightforward - on hold - but with new economic forecasts, the dot plot, a statement, and the press conference to follow, there could be fireworks."
9:41am: Stocks rise as PPI eases; Fed rate call to come
Stocks made steady progress at the open as easing wholesale prices backed an inflation-easing narrative ahead of the Federal Reserve's interest rate decision later today.
Shortly after the opening bell, the Dow Jones Industrial Average was up 12.09 points at 36,590.03, the S&P was up 6.45 points, 0.1%, at 4,650.15 and the Nasdaq Composite was up 56.31 points, 0.4%, at 14,589.71.
According to the Bureau of Labor Statistics, producer prices grew 0.9% on-year in November, slowing from October's 1.2% rise, and below the 1.0% consensus.
October's reading was downwardly revised from a 1.3% increase.
On a monthly basis, prices were flat, against expectations for 0.1% growth.
Excluding food and energy, annual producer price growth slowed to 2.0% in November from 2.4% in October, short of the 2.2% consensus.
The figures follow data on Tuesday showing the annual consumer price inflation rate in the US cooled as expected last month.
Stocks on the move include Pfizer, down 8.9%, after the pharmaceuticals giant releeased guidance below Street expectations while Tesla eased after recalling more than 2 million electirc vehicles due to a defect.
7:00am: Stocks called higher ahead of interest rate decision
Stocks are expected open highe, as the end of year rally continues, with attention switching to the Federal Reserve’s interest rate decision later in the session.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.2%, while those for the S&P 500 were 0.2% higher and contracts for the Nasdaq 100 futures climbed 0.2%.
Deutsche Bank’s Jim Reid said the US central bank is expected to leave rates unchanged for a third consecutive meeting.
“As a result, the focus is likely to be on the latest dot plot for where they see rates moving over the next couple of years,” he said.
He explained Deutsche’s US economists think it will only show 50bps of cuts in 2024, which would be a direct challenge to market expectations, since futures are currently pricing in 109bps of cuts by the December 2024 meeting.
Apart from that, the focus will be on what Chair Powell says in the press conference, particularly if there’s any potential timeline for reducing rates.
However, Reid pointed out the Deutsche economists believe that Powell will stop short of declaring the tightening cycle as over, likely restating that “We are prepared to tighten policy further if it becomes appropriate to do so.”
Ahead of the Fed’s rate call, the producer price index, a leading inflation indicator tracking wholesale prices, is expected to have increased 0.1% in November after falling by a half-point in October.
The annualised rate is expected to decrease to 1% from 1.3%.
Stocks to watch include Tesla, down 1% in pre-market trading, on news that the EV maker is recalling more than 2 million vehicles to rectify an Autopilot defect.