Wall Street ends higher, Treasury yields slip as Fed sees rate cuts this year
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2025. REUTERS/Brendan McDermid/File Photo
NEW YORK :U.S. stocks bounced on Wednesday after the U.S. Federal Reserve left its key interest rate unchanged but hinted it would reduce borrowing costs by half a percentage point by the end of the year.
Gold flipped positive, touching a record high, and U.S. Treasury yields pared gains after the central bank lowered its economic outlook for the year and marked up its inflation expectations in view of U.S. President Donald Trump's tariff rollouts.
All three major U.S. stock indexes gained upward momentum after the announcement, with tech-related megacaps boosting the Nasdaq to a 1.4 per cent advance on the day.
"Given growing worries around tariffs and how they could affect U.S. growth and inflation, the Fed took a widely expected 'wait and see' approach on rates," said Matthias Scheiber, head of the multi-asset solutions team at Allspring Global Investments in London.
"We believe the next likely window for the Fed to lower rates will be May or later, and market analysts expect two cuts in 2025."
At his subsequent Q&A session, Fed Chair Jerome Powell acknowledged inflation is still elevated and uncertainties related to policy changes persist, but he provided reassurance that the economy remains strong and the labor market is solid.
International investors had been focused on Turkey after President Tayyip Erdogan's main political rival was detained in what the main opposition party called "a coup against our next president," battering Turkish stocks and sending the lira plunging as much as 14.5 per cent against the dollar, before paring those losses.
Ukrainian President Volodymyr Zelenskiy spoke with U.S. President Donald Trump on Wednesday, with the leaders agreeing to work to end the war in Ukraine.
"We live in such a global society, there's always going to be something happening out there in the world," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. "But long-term investors, I believe, have the ability to kind of look through some of that day-to-day noise."
The Dow Jones Industrial Average rose 383.32 points, or 0.92 per cent, to 41,964.63, the S&P 500 gained 60.63 points, or 1.08 per cent, to 5,675.29 and the Nasdaq Composite rose 246.67 points, or 1.41 per cent, to 17,750.79.
European stocks closed higher, notching their fourth consecutive session of gains buoyed by Germany's debt overhaul as investors focused on the Fed.
Europe's broad FTSEurofirst 300 index rose 4.30 points, or 0.20 per cent.
MSCI's gauge of stocks across the globe rose 6.53 points, or 0.78 per cent, to 846.06.
The pan-European STOXX 600 index rose 0.19 per cent, while Emerging market stocks fell 1.94 points, or 0.17 per cent, to 1,143.23. MSCI's broadest index of Asia-Pacific shares outside Japan closed lower by 0.14 per cent, to 594.18, while Japan's Nikkei fell 93.54 points, or 0.25 per cent, to 37,751.88.
The dollar gave back some gains in the wake of the central bank's decision to keep rates unchanged, but the Fed indicated that policymakers expect to reduce borrowing costs by half a percentage point this year.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.18 per cent to 103.49, with the euro down 0.39 per cent at $1.09.
Against the Japanese yen, the dollar weakened 0.26 per cent to 148.87.
The Turkish lira weakened by 3.62 per cent at 38.00 per dollar.
Cryptocurrencies gathered some momentum in the wake of the Fed's downgraded economic outlook.
Bitcoin gained 4.33 per cent to $85,561.91. Ethereum rose 6.69 per cent to $2,032.87.
U.S. Treasury yields pared their earlier advance after policymakers indicated they anticipate the Fed funds target rate will be reduced by 50 basis points this year.
The yield on benchmark U.S. 10-year notes fell 3.3 basis points to 4.249 per cent, from 4.281 per cent late on Tuesday.The 30-year bond yield fell 2 basis points to 4.5593 per cent from 4.579 per cent late on Tuesday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 6.3 basis points to 3.979 per cent, from 4.042 per cent late on Tuesday.
Crude prices gained ground after U.S. data showed an inventory drawdown, while markets kept an eye on the limited Russia-Ukraine ceasefire.
U.S. crude rose 0.39 per cent to settle at $67.16 per barrel, while Brent settled at $70.78 per barrel, up 0.31 per cent on the day.
Gold prices turned positive and touched a record high in the wake of the Fed's lowered economic projections.
Spot gold rose 0.43 per cent to $3,047.00 an ounce. U.S. gold futures rose 0.24 per cent to $3,042.30 an ounce.
