File - A sign at the intersection of Broad and Wall streets is shown outside the New York Stock Exchange, Monday, Dec. 11, 2023, in New York. A powerful rally across Wall Street sent the Dow Jones Industrial Average to a record after the Federal Reserve indicated that the cuts to interest rates investors crave so much may be coming next year.(AP Photo/Yuki Iwamura, File)
NEW YORK (AP) – Wall Street is holding near record highs as excitement builds that relief from high interest rates may be coming next year. The S&P 500 was up 0.4% early Thursday. The Dow rose 14 points, and the Nasdaq rose 0.6%. Stocks have been rising broadly since October on hopes inflation has cooled enough for the Federal Reserve to stop raising interest rates and begin considering cutting them. Those hopes strengthened Wednesday after the Fed indicated it expects to cut rates next year by more than it earlier forecast. Treasury yields continued to fall.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
Wall Street pointed toward gains early Thursday following a powerful rally that sent the Dow Jones Industrial Average to a record high as the Federal Reserve indicated that interest rate cuts are likely next year.
Futures for the S&P 500 rose more than 0.3% before the bell as did futures for the Dow.
Lower rates can ease pressure on the economy and goose prices for all kinds of investments. Markets have been rallying since October on hopes not only that the Fed’s aggressive series of rate hikes were over, but that cuts may be on the way.
The Federal Reserve held its main interest rate steady at a range of 5.25% to 5.50% Wednesday as was widely expected. That’s up from virtually zero early last year. And inflation has retreated sharply from its peak of 9% while the economy has remained solid.
Fed Chair Jerome Powell said Wednesday that the benchmark rate is likely already at or near its peak while acknowledging that inflation remains too high. Powell said Fed officials don’t want to wait too long before cutting the federal funds rate, which is at its highest level since 2001.
“We’re aware of the risk that we would hang on too long” before cutting rates, he said. “We know that’s a risk, and we’re very focused on not making that mistake.”
Like the Fed, the European Central Bank and Bank of England were expected to keep their interest rate policies unchanged, as were the central banks of Norway and Switzerland.
Moderna shares jumped more than 8% in premarket after the drug company announced that its treatment for high-risk melanoma – in concert with Merck’s Keytruda – sharply reduced recurrence and death. The companies have begun Phase 3 studies for the treatment.
Germany’s DAX jumped 0.5% and the CAC 30 in Paris was up 1.1%. Britain’s FTSE 100 surged 1.9%.
In Asian trading, Tokyo’s Nikkei 225 fell 0.7% to 32,686.25 as the U.S. dollar slipped to 141.71 Japanese yen from about 145 yen the day before. The value of the dollar tends to mirror expectations for interest rates, which affect returns on certain kinds of investments as well as borrowing. A weaker dollar undercuts the value of overseas profits for Japanese manufacturers.
Toyota Motor Corp.’s shares fell 3.8% and Sony Corp. lost 1.1%. Honda Motor Co. shed 5%.
Hong Kong’s Hang Seng index climbed 1.1% to 16,408.26, while the Shanghai Composite slipped 0.3% to 2,958.99 after a World Bank report forecast that the Chinese economy will post 5.2% annual growth this year but slow sharply to 4.5% in 2024. The report said the recovery of the world’s second largest economy from the setbacks of the COVID-19 pandemic and a downturn in the property sector was still “fragile.”
Australia’s S&P/ASX 200 jumped 1.7% to 7,377.90 and the Kospi in Seoul advanced 1.3% to 2,544.18. India’s Sensex was up 1.3% and the SET in Bangkok jumped 1.5%.
Treasury yields tumbled in the bond market. The yield on the 10-year Treasury dropped to 3.95% early Thursday from 4.03% late Wednesday. It was above 5% in October, at its highest level since 2007. The two-year yield, which moves more on expectations for the Fed, sank to 4.34% from 4.44%.
In other trading, benchmark U.S. crude oil gained $1.63 to $71.10 per barrel in electronic trading on the New York Mercantile Exchange. It picked up 86 cents to $69.47 on Wednesday.
Brent crude, the international standard, was up $1.46 at $75.72 per barrel.
The euro rose to $1.0935 from $1.0876.
On Wednesday, the Dow jumped 512 points, or 1.4%, to 37,090.24. The S&P 500 rose 1.4% to within reach of its own record. The Nasdaq composite gained 1.4%.
Rate cuts particularly help investments seen as expensive or that force their investors to wait the longest for big growth. Some of Wednesday’s bigger winners were bitcoin, which rose nearly 4%, and the Russell 2000 index of small U.S. stocks, which jumped 3.5%.
Apple was the strongest force pushing upward on the S&P 500, rising 1.7% to its own record close. It and other Big Tech stocks have been among the biggest reasons for the S&P 500’s 22.6% rally this year.
