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US markets end sharply higher after Federal Reserve says 3 rate cuts are on the way

21 Mar 2024 Evaluate

The US markets ended sharply higher on Wednesday after the Fed announced its widely expected decision to leave interest rates unchanged but also maintained its forecast for three rate cuts this year. In support of its dual goals of maximum employment and inflation at a rate of 2 percent over the longer run, the Fed said it once again decided to maintain the target range for the federal funds rate at 5.25 to 5.50 percent. The target range for the federal funds rate has remained unchanged since the Fed raised rates by a quarter point last July. While the accompanying statement said Fed officials still need greater confidence inflation is moving sustainably toward 2 percent before cutting rates, the projections still point to three rate cuts this year.

The latest projections suggest Fed officials expect rates to be lowered to a range of 4.50 to 4.75 percent by the end of 2024. The interest rate forecast is unchanged from December and points to three quarter point rate cuts over the next nine months. On the sectoral front, Airline stocks moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 3.8 percent after ending Tuesday's trading at its lowest closing level in well over a month. Substantial strength also emerged among gold stocks, as reflected by the 3.8 percent spike by the NYSE Arca Gold Bugs Index. The rally by gold stocks came as the price of the precious metal surged in afterhours trading. Banking stocks also showed a significant move to the upside on the day, driving the KBW Bank Index up by 2.4 percent to its best closing level in a year.

Dow Jones Industrial Average rose 401.37 points or 1.03 percent to 39,512.13, Nasdaq surged 202.62 points or 1.25 percent to 16,369.41 and S&P 500 was up by 46.11 points or 0.89 percent to 5,224.62.


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