Dow surges nearly 500 points after Fed hints at rate cut

Wall Street stocks wavered before soaring higher on Wednesday as the Federal Reserve left its key interest rate unchanged, as expected, but indicated that the next move on rates will probably be a cut.

The Dow Jones Industrial Average jumped 476 points, or 1.3%, to 38,292. The S&P 500 climbed 0.9%, and the Nasdaq rose 1.3%.

The Federal Open Markets Committee (FOMC) concluded its two-day monetary policy meeting by letting the Fed funds target rate stand at 5.25%-5.50%.

“They left rates unchanged and the note mentions a lack of further progress on inflation,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “That’s no surprise.”

The accompanying statement left the timing of any rate cut in doubt, and Fed officials underscored their concern that the first months of 2024 have done little to build the confidence they seek in falling inflation.

At a press conference, Chair Powell said the central bank remains committed to its 2% inflation target and that the labor market was normalizing, citing data released on Wednesday showing job openings dropping to a three-year low.

First-quarter reporting season has breezed passed the halfway point, with 310 of the companies in the S&P 500 index having reported. Of those, 77% posted consensus-beating earnings, according to LSEG.

Analysts now expect aggregate first-quarter S&P 500 earnings growth of 6.6% year-on-year, a significant improvement over the 5.1% estimate as of April 1, LSEG data showed.

Among individual companies, Advanced Micro Devices shed 7.4% after its disappointing artificial intelligence chip sales forecast, while Super Micro Computer slid 11.0% following the company’s quarterly revenue miss.

The weak results pulled the Philadelphia Semiconductor Index 1.3% lower.

Amazon rose 4.5% on better-than-expected quarterly results as interest in AI helped drive cloud-computing growth.

Johnson & Johnson advanced 4.8% after it said it will proceed with a proposed $6.48 billion lawsuit settlement over allegations that its baby powder and other talc products cause ovarian cancer.

Starbucks tumbled 17% after the coffee chain cut its sales forecast as it posted the first drop in same-store sales in nearly three years.

CVS Health plunged 16% after the healthcare company’s earnings fell short of consensus and it slashed its annual profit forecast.