© Reuters. FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2023. REUTERS/Brendan McDermid/File Photo
By Caroline Valetkevitch
NEW YORK (Reuters) -U.S. stocks rose on Wednesday after the Federal Reserve held interest rates steady and signaled that its tightening policy of the last two years is at an end and that it sees lower borrowing costs in 2024.
Indexes were flat ahead of the policy statement.
Following the statement, U.S. interest rate futures raised the odds of a May rate cut to 90% versus 80% just before the announcement, according to LSEG’s Fedwatch.
All major sectors were higher, led by gains in utilities.
“By raising the bar to further tightening and telegraphing at least three rate cuts in 2024, the Fed turned decisively dovish this afternoon, waving a red flag in front of market bulls hoping for an easing in policy,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
The rose 218.31 points, or 0.6%, to 36,796.25, the S&P 500 gained 29.85 points, or 0.64%, to 4,673.55 and the added 85.29 points, or 0.59%, to 14,618.69.
Stocks have been rising in recent weeks on the view that the Fed is likely done hiking rates and will shift to rate cuts next year.
Earlier in the day, the Labor Department’s report showed the Producer Price Index (PPI) for final demand rose 0.9% on an annual basis in November. Economists polled by Reuters had estimated a 1% advance. On a month-on-month basis, producer prices were unchanged, against an estimated 0.1% increase.