S&P 500 tops 5,200 as yields fall on Fed-cut bets
Wall Street traders sent stocks to fresh all-time highs as the Federal Reserve signaled it’s on track to cut interest rates for the first time since the onset of the pandemic.
In a historic move, the S&P 500 topped 5,200 on speculation that the end of the most-aggressive Fed hiking cycle in a generation will keep fueling Corporate America’s profits. Gains in equities were almost broad-based, with areas that have been lagging this year – like small caps – rallying. Short-term Treasuries outperformed, with traders now seeing higher odds of a first rate-cut in June.
Fed officials maintained their outlook for three cuts this year and moved toward slowing the pace of reducing their bond holdings, suggesting they aren’t alarmed by a recent uptick in inflation. While Jerome Powell continued to highlight officials would like to see more evidence that prices are coming down, he also said it will be appropriate to start easing “at some point this year.”
“The sum total of this ‘no news is good news’ press conference is that markets continue to have a green light to run higher,” said Chris Zaccarelli at Independent Advisor Alliance. “This Fed isn’t going to stand in the way of the bull market.”
The tech-heavy Nasdaq 100 rose 1%. Two-year yields declined seven basis points to 4.6%. The dollar retreated.
The Fed statement and news conference didn’t break any new news other than on the balance sheet – and that’s bullish for markets, Zaccarelli said.
Investors were worried that the recent higher-than-expected inflation data would cause the Fed to back off from its projection of three cuts for this year and those fears were unfounded. In addition, Chairman Powell mentioned that the Fed was thinking about slowing the pace of its balance sheet runoff.
The sum total of this “no news is good news” news conference is that markets continue to have a green light to run higher, Zaccarelli said. Some experts, he said, who weren’t surprised to see the initial reaction from investors was to push stock prices up, expect that to continue until some new shock because the Fed isn’t likely to stand in the way of the bull market.
Corporate highlights:
-The U.S. will award Intel Corp. $8.5 billion in grants and as much as $11 billion in loans to help fund an expansion of its semiconductor factories, marking the largest award from a program designed to reinvigorate the domestic chip industry.
-Boeing Co. predicted a massive cash drain for the first quarter as regulatory scrutiny and slower output of its 737 Max jetliner following a January mid-air accident take their toll on its finances.
-Reddit Inc. and its selling shareholders are guiding that they could price the social media company’s initial public offering at the top of its marketed range or above, according to people familiar with the matter.
-Short seller Hindenburg Research targeted data center owner Equinix Inc. Wednesday, alleging that the company manipulates its accounting and is selling an “AI pipe dream.” A representative for Equinix said the firm is investigating the claims.
-Chipotle Mexican Grill Inc.’s board proposed a 50-to-1 stock split to broaden the burrito chain’s investor base after a 13,000% run-up in the stock since its initial public offering.
-JPMorgan Chase & Co. unexpectedly lifted its dividend 9.5% in the wake of a record annual profit and as regulators signal they may rethink proposals for tightening capital rules.