Stocks rise as Fed signals fewer rate cuts

U.S. stocks experienced a rise, recovering from a significant decline the previous day, following Federal Reserve predictions of fewer interest rate cuts and increased inflation next year.

Economic indicators supported the Fed’s outlook, with initial jobless claims falling more than anticipated, and a revision of third-quarter gross domestic product (GDP) showing a 3.1% increase, up from the previously reported 2.8%.

Tim Ghriskey, a senior portfolio strategist at Ingalls & Snyder in New York, noted that the Fed’s message indicated interest rates would not decrease further if inflation did not decline. Recent inflation trends have raised concerns for the Fed.

Despite the market’s bounce back, there is a lack of strong conviction in the recovery.

Market gains

The Dow Jones Industrial Average rose by 235.23 points, or 0.56%, reaching 42,561.75.

The S&P 500 followed with an increase of 28.11 points, or 0.48%, to 5,900.05, while the Nasdaq Composite gained 99.50 points, or 0.52%, to 19,492.13.

This bounce marks a potential end to the Dow’s ten-session losing streak, its longest since 1974.

Both the Dow and S&P 500 faced their most significant one-day percentage drop since early August, and the Nasdaq recorded its largest daily fall since July, following the Fed’s announcement of limited rate cuts predicted for 2025.