Wall Street Close: Dovish Fed powers S&P 500 and Dow to fresh ATHs

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  • A dovish Fed rate decision helped send the S&P 500 and Dow Jones Industrial Average stock indices to record highs.
  • The Fed pushed back against the market’s pricing of premature rate hikes, with the dot-plot showing no hikes through 2023.

It was another day of record closes for the S&P 500 and Dow Jones Industrial Average indices; the former ended the session up 0.3% at 3973 and the latter up 0.6%, as it managed to eclipse the 33K level for the first time. Elsewhere, the Nasdaq 100 ended the session up 0.4%, the Russell 2000 gained 0.7% and the CBOE volatility index dropped 0.56 to 19.23, its lowest since February 2020.

In terms of GICS sector performance; Consumer Discretionary faired the best, gaining 1.4%. Industrials were in second place, gaining 1.1%. Defensive biased utilities faired the worst, dropping 1.6% on the day.

Driving the day

Stocks had opened the session on the back foot, but a more dovish than expected dot-plot from the Fed, as well as typically dovish policy guidance in the Fed’s statement and from Fed Chair Jerome Powell himself, helped stocks recover sharply back to record levels. The combination of a dovish Fed and expectations for a powerful economic recovery over the coming three years (the Fed’s new economic projection featured big upgrades to the growth forecasts in reflection of the positive impact of stimulus) seem pretty optimal for stock markets right now.

Other than the Fed, there was very little other news for markets to trade off of; US President Joe Biden had some harsh words for Russian President Putin, calling him a “killer”, but this didn’t move markets. Attention now turn to this week’s US/China meeting in Alaska and most recent reports suggest China is to ask the US to roll back Trump’s policies – most analysts would agree there is very little chance of that happening right now.

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