Forex Analysis & Reviews: 14.12.2023 - Fed gives green light: Dow...

14.12.2023 07:01 AM

Fed gives green light: Dow Jones breaks records

The U.S. Federal Reserve (Fed) announced that it is unlikely to further increase the interest rate. This decision by the Fed contributed to the growth of the Dow Jones Industrial Average, which reached its first record high since January 2022. Additionally, the S&P 500 and Nasdaq indexes each grew by 1.4%. The increase in the indexes is attributed to the end of the Fed's interest rate hike policy and predictions of lower borrowing costs by 2024.

The Fed kept the interest rates unchanged and forecasts a reduction by the end of 2024. These developments led to a surge in stock values following a statement by Fed Chair Jerome Powell about the unlikelihood of further rate increases.

Since March 2022, the Fed has raised the benchmark rate by 525 basis points to control inflation. According to Tom Martin of Globalt Investments, the current statement from the Fed indicates that inflation is expected to return to normal levels without the risk of recession.

The growth of the Dow Jones Index confirms that it has been in a bullish market since September 2022, following a drop of more than 20%.

All major sectors of the S&P 500 index showed growth during the day's rally. The real estate and utilities sectors, sensitive to interest rates, each grew by more than 3%, leading the sector's growth. The Russell 2000 index, covering small-cap companies, also rose by 3.5%.

The Dow Jones Industrial Average increased by 512.3 points (1.4%), reaching 37,090.24. The S&P 500 added 63.39 points (1.37%), climbing to 4,707.09, while the Nasdaq Composite increased by 200.57 points (1.38%), reaching 14,733.96.

Among the Dow Jones index companies, Walgreens Boots Alliance Inc showed the most significant growth, increasing by 7.41%, Home Depot Inc rose by 3.13%, and Dow Inc grew by 3.01%.

The S&P 500 and Nasdaq indexes reached new annual closing highs. Since the beginning of the year, the S&P 500 has grown by 22.6%, the Nasdaq by 40.7%, and the Dow by 11.9%.

Leading the growth in the S&P 500 index were Vertex Pharmaceuticals Inc, which increased by 13.23%, Revvity Inc, up by 10.33%, and Zions Bancorporation, rising by 9.68%.

Stock prices have been rising for several weeks on expectations that the Fed would end rate hikes and begin lowering them next year.

According to Fedwatch LSEG, after the Fed's statement, the probability of a rate cut in May increased to 90% compared to 80% before the announcement.

Earlier that day, data showed that producer prices in the U.S. in November remained unchanged due to lower energy prices. Consumer prices in the U.S. unexpectedly increased in November as the reduction in gasoline prices was more than offset by higher rent costs.

Contrary to the day's trend, Pfizer shares fell by 6.7% after the drug manufacturer predicted lower-than-expected Wall Street revenues for 2024.

Trading volume on U.S. exchanges reached 14.35 billion shares, above the 20-day average of 11.04 billion.

On the New York Stock Exchange, the number of advancing issues outnumbered decliners by a ratio of 7.01 to 1; on the Nasdaq, the ratio was 3.18 to 1 in favor of advancers.

The S&P 500 recorded 89 new 52-week highs and 1 new low; the Nasdaq Composite posted 195 new highs and 147 new lows.

The CBOE Volatility Index, based on S&P 500 option trades, rose by 0.99% to 12.19.

Gold futures for February delivery rose by 2.41%, reaching $2,000 per troy ounce. WTI crude futures for January delivery increased by 1.73%, to $69.80 per barrel. Brent crude futures for February delivery rose by 1.88%, to $74.62 per barrel.

On the forex market, the EUR/USD pair rose by 0.81% to 1.09, while the USD/JPY fell by 1.67% to 142.99.

The U.S. dollar index futures fell by 0.91% to 102.52.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.