U.S. Stock Markets Climb After Fed’s Decision
NEW YORK (AP) — U.S. stock indices gained ground following the Federal Reserve’s decision to maintain its primary interest rate, a move that was largely anticipated. The S&P 500 increased by 1.1% on Wednesday, while the Dow Jones Industrial Average rose by 0.9%, and the Nasdaq composite gained 1.4%. This steady growth comes after weeks of significant market volatility. In the bond market, Treasury yields fell after the Fed announced it would start reducing its holdings of Treasurys starting in April. By reallocating more funds into Treasurys monthly, the Fed aims to help lower long-term yields.
Market Response to Fed’s Announcement
On Wednesday afternoon, U.S. stock markets continued their upward trend after the Federal Reserve decided to keep interest rates unchanged. The S&P 500 surged by 1.7%, building on its initial gains post-announcement. The Dow was up by 589 points (1.4%) by 3:15 p.m. ET, and the Nasdaq climbed by 2.3%.
Context of Market Fluctuations
These gains followed weeks of volatile trading conditions in U.S. stock markets, with investors anxious about the potential consequences of President Donald Trump’s administration and its trade policies. Trump has expressed a desire to bring manufacturing jobs back to the U.S. and reduce the size of federal employment, leading to concerns about how much economic strain these changes might entail.
Concerns Over Economic Impact
The uncertainty cast by Trump’s multiple tariff announcements has led economists to warn that U.S. businesses and households might curtail their spending due to heightened anxiety about the economy. This backdrop prompted the Fed’s cautious stance on interest rates, which, if lowered, could stimulate growth but also risk exacerbating inflationary pressures amid existing concerns.
Federal Reserve’s Future Outlook
Despite current uncertainties, Fed officials maintain that they might still reduce interest rates twice by year-end, aligning with predictions made at the end of last year. However, they also expect weaker economic growth and higher inflation rates than previously forecasted, which raises fears of “stagflation,” where economic stagnation coincides with high inflation— a challenging scenario for the Fed to navigate.
Corporate Movements on Wall Street
Despite these potential issues, the stock market saw gains, partly due to lower Treasury yields, which alleviated some pressure on the market. Notably, Nvidia’s stock rose by 3.8%, despite its year-to-date loss of 10.8%. Meanwhile, Tesla’s shares increased by 6.3% after experiencing two consecutive declines. In contrast, General Mills’ shares fell by 1.6% after reporting a quarterly profit that, while stronger than expected, did not meet revenue targets.
Global Market Reactions
Internationally, Japan’s Nikkei 225 index dropped by 0.2%, reflecting the Bank of Japan’s decision to maintain interest rates. Additionally, Japan reported a trade surplus for February, with exports surging over 11% as manufacturers expedited shipments to avoid rising tariffs imposed by Trump. Mixed results were observed across various European and Asian markets.
