US stocks traded in the green on Wednesday, eyeing a bid for fresh 2023 highs, as investors dissected the Federal Reserve’s last interest rate decision of the year.
The benchmark S&P 500 (^GSPC), the tech-heavy Nasdaq Composite (^IXIC), and the Dow Jones Industrial Average (^DJI) each rose around 0.6% in the wake of the decision. The Dow and S&P 500 ended Tuesday at their highest since early 2022, with the Dow notching its third-highest close ever.
The Fed held its benchmark interest rate in a range of 5.25%-5.50%, the highest in 22 years, on Wednesday. The move had been widely anticipated by investors.
Also in the Fed’s release was the central bank’s Summary of Economic Projections, which includes central bankers projections for interest rates next year. The Fed now sees 75 basis points of rate cuts coming in 2024, which accounts for one more rate cut than had been projected in September.
Fed Chair Jerome Powell will have a press conference at 2:30 p.m. ET.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
Elsewhere, oil rose to come off the lowest levels since June as the market weighed the COP28 deal to transition away from fossil fuels. West Texas Intermediate (CL=F) and Brent crude futures (BZ=F) both added roughly 1%, trading around $69 a barrel and $74 a barrel, respectively.
In individual corporates, Tesla (TSLA) shares slipped after the EV maker recalled over 2 million cars to fix an Autopilot safety flaw and said some of its Model 3 vehicles will lose a US consumer tax credit.
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Fed sees lower inflation, additional rate cuts in 2024
The Federal Reserve’s latest Summary of Economy Projections showed the Central Bank sees inflation falling faster than previously forecasted.
The Fed now sees its preferred inflation gauge, core Personal Consumption Expenditures (PCE), falling to 2.4% in 2024. Originally, the Fed had seen inflation hitting 2.6% in 2024. Core PCE excludes the volatile food and energy categories.
With inflation falling faster than expected, the Federal Reserve upped its expectations for rate cuts in 2024. The Fed now sees 75 basis points of cuts next year, up from a previous forecast of two rate cuts in 2024.
Below is a full breakdown of how the Fed’s projections shifted from September to December.
The Fed now sees Core Personal Expenditures (PCE), which excludes the volatile food and energy categories, falling to 2.4% in 2024. (Federal Reserve) -
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One chart to watch post Fed
Over the past month investor expectations for a rate cut in March moved up significantly.
As of Wednesday, investors are placing a roughly 47% chance the Fed cuts rates by the end of the March meeting, per the CME FedWatch Tool. A month ago, investors had placed less than a 11% chance on a Fed cut by the end of the March meeting.
After the Wednesday’s meeting, CME projections will be one way to track how market participating are digesting Fed chair Powell’s commentary and if the Fed agrees with the recent market sentiment that cuts will come sooner than expected.
Entering the Federal Reserve’s December meeting, investors are placing a 47% chance that the central bank cuts interest rates by the end of the December meeting. (Yahoo Finance) -
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The ‘bar is high’ for stocks during today’s Fed meeting
Stocks have ripped higher since the Fed’s last meeting on Nov. 1. The S&P 500 rose over 9% between meetings, its largest increase between two Federal Reserve meetings since 2009, according analysis from Bespoke Investment Group.
To eToro US investment analyst Callie Cox this means the “bar is high” for stocks to move up as Fed Chair Powell speaks on Wednesday.
Increased confidence that the Federal Reserve is done hiking interest rates and cuts could come sooner than initially thought drove the major averages higher into the December Fed meeting.
On Wednesday, investors will be looking for affirmation of that narrative both in Powell’s commentary and within the latest “dot plot,” which will project how many rate cuts Fed officials see happening in 2024.
A chart from Cox also showed that the moves in stocks coincided with the second-largest drop in the 10-year Treasury yield (^TNX) seen between meetings since March 2020.
Stocks soared and bond yields tumbled in between the November and December Fed meetings as investors grew increasingly confident that the central bank is done hiking interest rates. (eToro, Bloomberg) -
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United States Steel rises as bids to purchase company reach above $40 per share
Further speculation on a deal to buy United States Steel (X) is sending shares higher on Wednesday.
The stock popped more than 3% after CNBC’s David Faber reported that the company’s board is set to meet today to discuss multiple bids to buy United States Steel.
Faber noted that multiple of those bids are at “excess of $40 per share” and one of them is coming from Cleveland Cliffs (CLF).
United States Steel stock has soared since Cleveland Cliffs announced it made an offer to buy US Steel in August. -
Pfizer shares near COVID lows after guidance cut
Pfizer (PFE) stock has round-tripped from its pandemic-era highs and is threatening its lowest levels since 2020 with Wednesday’s drop.
The company announced on Wednesday it expects full-year 2024 earnings per share to come in at $2.05-$2.45, a full $0.40 per share below its prior forecasts. Pfizer’s effective tax rate is also expected to climb, while offering revenue forecasts below Street estimates.
Pfizer said Wednesday that sales for its COVID-19 vaccine and COVID-19 treatments would total about $8 billion next year. Reuters noted Wednesday that analysts had expected combined sales for this category to reach $13 billion.
The stock was down as much as 9% in early trading on Wednesday, briefly falling below $26 per share. The stock reached a low of $23.39 in March 2020 as markets crashed in the early days of the COVID-19 pandemic.
Back out some of the pandemic-induced panic-selling lows reached in March 2020 and you’d have to go back to the fall of 2017 to find Pfizer stock trading near current levels.
Should shares settle near Wednesday morning’s lows on a weekly basis, Pfizer’s lows reached in February 2016 would be in play, according to Yahoo Finance data.
Source: Yahoo Finance -
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Stocks open roughly flat with most market action expected in the afternoon
Stocks opened Wednesday’s trading day marginally higher as investors awaited the latest policy update from the Federal Reserve.
The Nasdaq Composite (^IXIC) popped about 0.1% while the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) teetered on both sides of the flat line.
With the policy update expected at 2 p.m. ET followed by a press conference with Federal Reserve chair Jerome Powell at 2:30 p.m. ET, most of the market volatility is expected to come in the final 90 minutes of trading on Wednesday as listen for clues on when the Federal Reserve may cut interest rates.
Analysis from Bespoke Investment Group shows most of the market action during Fed days has come after 2:30 p.m. ET. (Bespoke Investment Group) -
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All eyes on the Fed on decision day
The Federal Reserve is widely expected to hold interest rates steady this Wednesday at the end of the central bank’s last policy meeting of 2023.
Investors will listen out for any sign that the most aggressive rate-hiking campaign since the 1980s is over when the policy decision comes at 2 p.m. ET.
Fed Chair Jerome Powell (AP Photo/Mark Schiefelbein) (ASSOCIATED PRESS) Fed Chair Jerome Powell is expected to play down the prospect of a rate cut anytime soon, even as some traders bet on a pivot as early as March.
Read this to find out what market observers are watching from the Fed, from Yahoo Finance’s Jennifer Schonberger.
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