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Stocks Extend Rally as Wall Street Bakes In 2024 Inflation Pullback Theme

The Dow Jones notched a new record high with market participants flocking to risky assets in the post-Fed rally.

Dow Jones reached another record high as traders and investors bet on risky assets in the post-Fed rally.

Key Takeaways

  • Stocks across the board rocket higher, riding the Fed’s rate announcement momentum.
  • The Dow Jones Industrial Average flipped to a fresh record high, building on its previous-day gain. 

Stocks Tick Higher to New Records 

Wall Street rejoiced for a second straight day after the Federal Reserve announced the end of the rate-hiking cycle. Investors flocked to the risky assets, hunting for bargains and lifting major indexes to record highs.  

The Dow Jones Industrial Average added 0.4% to notch a new all-time high of 37,248 points. Further, the Nasdaq Composite shifted gears to log a fresh 2023 record of 14,761 points. The tech-heavy index is sitting roughly 9% away from its all-time high. And the S&P 500 added 0.3% on the day. The broad-based stock average is now resting less than 2% away from its ultimate peak.  

Federal Reserve’s Uplifting Message 

All that was made possible with some help from Federal Reserve officials. On Wednesday, Fed chief Jerome Powell and his group of central bankers decided to leave interest rates unchanged. What’s more, they projected three rate hikes coming in 2024 to a total of 0.75% cut of the federal funds rate. The Fed’s benchmark rate is currently at 5.25% to 5.50%, a 22-year high.  

The premise behind this decision is that inflation is coming down and there is no reason for rates to stay elevated for longer. US inflation for October drifted down to 3.1%, solidifying the downward trend of consumer prices.  

Looking Ahead

In that context, the investment theme for 2024 is already being priced in. Inflation is expected to continue slowing, ultimately reaching the Federal Reserve’s 2% goal.  

Looking ahead, no major news is expected today and next week is fairly quiet as well. Traders may use the time to take stock of their recent bets, reevaluate their strategy, and plan their big moves for next year.