Dow Closes at Record High Above 37,000

The Dow Jones industrial average hit its first record closing high since January 2022 and the S&P 500 and Nasdaq ended sharply higher on Wednesday after the Federal Reserve signaled that its interest rate-hiking policy of the last two years is at an end and that it sees lower borrowing costs in 2024.

In its policy statement, the Fed also left interest rates steady, as expected, and a near-unanimous 17 of 19 Fed officials projected that the policy rate will be lower by the end of 2024.

Indexes were flat ahead of the announcement, and quickly gained ground after the news.

Stocks sharply extended gains as Fed Chair Jerome Powell said during a press conference that the Fed is “not likely” to hike further and that the Fed is “very focused on not making the mistake of keeping rates too high for too long.”

The Dow record confirms that the index has been in a bull market since tumbling more than 20% through its closing low in September 2022, according to a common definition.

The rally was broad-based with all major S&P 500 sectors ending higher, and rate-sensitive S&P 500 real estate and utilities sectors gaining the most. The small-cap Russell 2000 index also rallied.

“The statement is telling us that the Fed is seeing what the markets have already started to discount, that you’re going to have inflation back to normal without a recession,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta.

“We kind of hoped it was going to be this, but we didn’t really think it was.”

Following the statement, U.S. interest rate futures raised the odds of a May rate cut to 90% versus 80% just before the announcement, according to LSEG’s Fedwatch.

According to preliminary data, the S&P 500 gained 62.65 points, or 1.35%, to end at 4,706.35 points, while the Nasdaq Composite gained 198.42 points, or 1.37%, to 14,731.81. The Dow Jones Industrial Average rose 515.79 points, or 1.41%, to 37,093.73.

Stocks have been rising in the past several weeks on the view that the Fed is likely done hiking rates and will shift to rate cuts next year.

Earlier in the day, the Labor Department’s report showed the Producer Price Index (PPI) for final demand rose 0.9% on an annual basis in November. Economists polled by Reuters had estimated a 1% advance. On a month-on-month basis, producer prices were unchanged, against an estimated 0.1% increase.

Among the day’s decliners, Pfizer dropped to a 10-year low, after the drugmaker forecast 2024 revenue below Wall Street’s expectations.