The S&P 500 gains as investors react to the Fed's rate decision, while trade tensions add market
On Wednesday, stocks climbed as the S&P 500 recovered from its recent downturn, briefly entering correction territory since late February.
According to CNBC, the US Federal Reserve maintained its forecast of two interest rate cuts in 2025.
The Dow Jones Industrial Average gained 383.32 points, or 0.92 percent, closing at 41,964.63. The S&P 500 rose 1.08 percent to 5,675.29, while the Nasdaq Composite advanced 1.41 percent, settling at 17,750.79.
The US Federal Reserve kept the federal funds rate within the expected range of 4.25 percent to 4.5 percent. It also reaffirmed its projection for two rate cuts later this year, despite acknowledging that “uncertainty around the economic outlook has increased.”
Federal Reserve Chair Jerome Powell, speaking at a press conference, described the economy as “strong overall” and highlighted progress over the past two years.
“[US] Labour market conditions are solid, and inflation has moved closer to our 2 percent longer-run goal, though it remains somewhat elevated,” he said.
Powell also noted that any inflationary impact from tariffs would likely be temporary.
Investors reacted positively to the Fed’s commitment to rate cuts and Powell’s reassurance about economic stability.
Michael Green, chief strategist at Simplify Asset Management, told CNBC that recent inflation data has followed a seasonal pattern.
“We’ve now had two consecutive summers in which inflation has been much weaker than expected, and two consecutive winter and spring periods in which inflation has been higher. That suggests that there is residual seasonality that is not being properly captured,” Green said.
The Fed’s decision comes amid escalating trade tensions. US President Donald Trump recently imposed tariffs on goods from Canada, Mexico, and China, prompting retaliatory duties from Canada and China.
Additionally, Trump’s temporary tariff exemptions on certain imports from Canada and Mexico are set to expire on April 2.
The rally followed a volatile Tuesday, when markets saw renewed sell-offs after two days of gains.
The Dow and S&P 500 remain over 6 percent and 7 percent below their recent closing highs, respectively, while the Nasdaq is down approximately 12 percent from its record close.
