With yesterday’s historic high, the Dow Jones extends its Q4 rally to more than 10%. On the other hand, the technology sector also makes a fresh all-time high.
In a historic surge, the Dow Jones Industrial Average set a new record by closing above 37,000 points for the first time. The Federal Reserve’s indication of multiple rate cuts in the coming year was the major catalyst behind the move.
The 30-stock Dow soared by 512.30 points, or 1.40%, finishing at 37,090.24, surpassing its previous record from January 2022. The S&P 500 also saw a significant uptick, jumping 1.37% to close at 4,707.09, crossing the 4,700 threshold for the first time since January 2022. The Nasdaq Composite climbed 1.38% to 14,733.96, with all three major averages hitting fresh 52-week highs.
As anticipated, the Federal Reserve also maintained the benchmark overnight borrowing rate in the 5.25% to 5.5% range but surprised investors by forecasting three rate cuts in 2024. Thus, the central bank signals a more accommodative monetary stance than previously indicated.
This move follows increasing investor expectations for the Fed to address the slowing trend in inflation, supported by recent data showing a moderation in inflation rates. The central bank further acknowledged the easing of inflation over the past year, accompanying the formal lowering of its inflation forecast for 2024 to 2.4% from the previous 2.6%. Speaking to CNBC, Gina Bolvin, president of Bolvin Wealth Management Group said:
“The Fed has given the market an early holiday gift today when, finally, for the first time, they have commented positively about inflation. It appears that the Fed is moving in the market’s direction, rather than the market moving towards the Fed. The Santa Claus rally may continue.”
Dow Jones Rally in Q4 2023
Since the commencement of the fourth quarter, the Dow has surged by over 10% as expectations for more accommodative policy strengthened. The robust gains on Wednesday propelled the Dow’s year-to-date rise to an impressive 11.9%. The broader market has witnessed even more substantial growth, with the S&P 500 recording a remarkable 22.6% increase in 2023. The Nasdaq Composite has outperformed, boasting a substantial year-to-date surge of 40.8%.
The market received positive inflation data earlier in the week, with the producer price index holding steady in November. This follows Tuesday’s release of the consumer price index, indicating a slowdown in prices to a 3.1% annual rate last month.
In response to the Fed’s rate forecast release, the 10-year Treasury yield, a crucial benchmark for mortgage rates and loans, dropped to 4.03%, marking its lowest level since August.
The shares of Bank of America and Wells Fargo saw notable gains, which surged by 4% and nearly 3% on Wednesday, respectively. These banks stand to benefit if the Fed implements a “soft landing”. Home Depot, positioned to gain from a potential housing market revival, also experienced a notable 3% increase. Along with Dow Jones, the technology sector fetched a new all-time high during Wednesday’s trading session.
