Wall Street today: Fed chairman Jerome Powell's interest rate cut remarks helped extend the rally picked by US stocks on July 31, as the equity market scored its best Federal Reserve day in two years. Wall Street cheered the dovish commentary by the US central bank, even as its rally was initially triggered by tech and semiconductor companies such as Nvidia, Meta, Apple, and others.
In line with Wall Street estimates, the US central bank kept its key interest rate unchanged at a 23-year high of 5.25 —5.50 per cent and noted further progress towards its two per cent inflation target. Powell signalled that the Fed could cut interest rates as soon as September if the data continues to suggest it is on track to meet its twin objectives of tackling inflation and employment.
Follow US Fed Meet Live Updates: FOMC holds rates steady for 12 months, admits ‘progress’ on inflation; Powell flags Sept cuts
On Wall Street, the Dow Jones Industrial Average rose 99.46 points, or 0.24 per cent, to 40,842.79. Major US indices spent almost all day in positive territory, hitting peaks during Fed Chair Jerome Powell's post-policy press conference.
The broad-based S&P 500 jumped 1.6 per cent for its best day in five months, i.e., since February, while the tech-rich Nasdaq Composite Index led major indices, winning 2.6 per cent to finish at 17,599.40.
Since February, it was the biggest one-day percentage gain for the S&P 500 and the Nasdaq. MSCI's gauge of stocks worldwide rose 13.12 points, or 1.64 per cent, to 814.55, also showing its biggest one-day percentage gain in five months. Europe's STOXX 600 index closed 0.8 per cent higher.
In US Treasuries, yields were mostly lower, with the benchmark 10-year note yield on track for its biggest drop in two weeks after the US Fed verdict. The yield on benchmark US 10-year notes fell 9.6 basis points to 4.045 per cent from 4.141 per cent on Tuesday. The two-year note yield, which typically moves with interest rate expectations, fell 8.7 basis points to 4.276 per cent, hitting its lowest since February.
The US dollar added to losses after the Fed statement and Powell's comments. The dollar index, which measures the greenback against a basket of currencies, including the yen and the euro, fell 0.37 per cent to 104.06. The euro was up 0.09 per cent at $1.0825.
Canada's main stock index climbed to a record high on Wednesday, helped by gains in resource, technology, and high dividend-paying stocks, as the Federal Reserve signalled it could begin cutting interest rates in the coming months.
The S&P/TSX composite index ended up 286.14 points, or 1.3 per cent, at 23,110.81, eclipsing its all-time closing high of July 16. The index was up 5.65 per cent for the month, its biggest monthly advance since November.
Equities staged a powerful rebound, with US chipmaking giant Nvidia Corp. surging 13 per cent after a bullish analyst call. In late trading, Meta Platforms Inc. also soared on a sales beat. Qualcomm Inc., the world’s biggest seller of smartphone processors, gave a strong revenue forecast.
Nvidia, the world’s third-most valuable company, has added a record $329 billion in market value, obliterating the single-day record it has repeatedly set in the past few months. Nvidia's rally comes one day after a seven per cent rout wiped out over $193 billion from the now $2.9 trillion firm, continuing a run of volatility.
The volatility comes as investors grapple with a violent rotation out of high-flying technology shares into left-behind companies that would benefit from Federal Reserve rate cuts. The AI chipmaking giant rallied 150 per cent in the first six months of the year before better-than-expected inflation stoked bets that the central bank would cut as soon as September.
In energy, oil prices rebounded from seven-week lows after the killing of a Hamas leader in Iran ratcheted up tensions in the Middle East and a sharp drawdown in US crude stockpiles. West Texas Intermediate crude rose 0.8 per cent to $78.50 per barrel.
US crude settled up 4.26 per cent at $77.91 a barrel, and Brent rose to $80.72 per barrel, up 2.66 per cent on the day. Gold prices extended gains after Powell's rate cut hint, rising well over one per cent on the day. Spot gold was up 1.63 per cent at $2,447.69 an ounce. US gold futures gained 1.77 per cent to $2,447.60 an ounce.
