Stocks surged on Wednesday as the Federal Reserve reaffirmed its outlook for two interest rate cuts this year, boosting investor confidence despite lingering economic uncertainties. The Dow Jones Industrial Average climbed nearly 400 points, while the S&P 500 and Nasdaq Composite also posted solid gains. Markets reacted positively to Fed Chair Jerome Powell’s remarks that the economy remains strong and inflation is gradually moving toward the central bank’s 2% target, though risks from tariffs and global trade tensions persist. Meanwhile, Treasury yields edged lower, and gold reached a new record high as investors weighed the Fed’s stance against broader market dynamics.

Key Takeaways:

  • Dow Rallies Nearly 400 Points as Investors Welcome Fed Outlook: The Dow Jones Industrial Average climbed 383.32 points, or 0.92%, to close at 41,964.63, rebounding after recent losses as investors reacted positively to the Federal Reserve’s reaffirmation of its rate-cut outlook. 
  • S&P 500 Gains Over 1% as Fed Reassures Markets: The S&P 500 jumped 1.08% to settle at 5,675.29, as the Fed’s commitment to maintaining two rate cuts in 2025 boosted investor sentiment. The index clawed back more of its losses from the recent market sell-off that had briefly pushed it into correction territory. 
  • Nasdaq Leads Gains, Surging 1.41% on Tech Stock Strength: The Nasdaq Composite advanced 1.41% to close at 17,750.79, outperforming other major indices as investors flocked back into technology stocks. The rally came as Nvidia CEO Jensen Huang unveiled a series of powerful new AI chips, boosting the semiconductor sector. 
  • Fed Holds Rates Steady, Sees Two Cuts in 2025 Despite Economic Uncertainty: The Federal Reserve maintained its benchmark interest rate at 4.25%-4.5%, a decision widely anticipated by markets. Fed Chair Jerome Powell emphasised that the economy remains strong and inflation is gradually approaching the central bank’s 2% target, though he acknowledged increased uncertainty in the economic outlook. Powell also downplayed concerns about tariffs, stating that any inflationary impact from new trade policies would likely be temporary. 
  • European Markets End Mixed as German Defence Stocks Slide: European markets saw a mixed session as investors assessed the Fed’s stance and key economic data from the eurozone. The pan-European Stoxx 600 index rose 0.19%, while France’s CAC 40 gained 57 points, or 0.70%. Italy’s FTSE MIB outperformed, climbing 511 points, or 1.31%, supported by gains in financials. However, Germany’s DAX fell 0.4%, snapping a three-day winning streak as defence firms Rheinmetall and Hensoldt declined following a major policy reform in Germany. Meanwhile, the FTSE 100 Index edged up 1.43 points, or 0.02%, to 8,706.66, as investors remained cautious ahead of key global trade developments. In other news, inflation in the euro area slowed in February, with the annual rate declining to 2.3% from 2.5% in January. On a monthly basis, consumer prices rose 0.4%, slightly below the preliminary estimate of 0.5%. 
  • Asia-Pacific Markets Trade Mixed as Investors Weigh Fed Decision: Asian stocks had a mixed session as investors reacted to the Fed’s decision while monitoring regional economic conditions. Japan’s Nikkei 225 slipped 0.25% to close at 37,751.88, while the broader Topix index managed a 0.45% gain to 2,795.96. South Korea’s Kospi rose 0.62% to 2,628.62, but the Kosdaq dropped 0.96% to 738.35. In China, the CSI 300 ended flat at 4,010.17, while Hong Kong’s Hang Seng Index also remained largely unchanged. India’s Nifty 50 advanced 0.39%, while the BSE Sensex gained 0.28% in midday trading. Meanwhile, Australia’s S&P/ASX 200 fell 0.41% to 7,828.30, while Indonesia’s Jakarta Composite Index rebounded 1.44% following sharp losses in the previous session.
  • Treasury Yields Edge Lower as Rate Cut Bets Rise: US Treasury yields declined on Wednesday following the Fed’s decision, reflecting increased expectations for rate cuts later this year. The benchmark 10-year Treasury yield fell more than 3 basis points to 4.245%, while the 2-year Treasury yield dropped over 6 basis points to 3.979%. 
  • Oil Prices Hold Steady Amid Economic Uncertainty: Crude oil prices remained relatively unchanged on Wednesday as traders balanced the Fed’s economic outlook with concerns over potential demand slowdowns. Brent crude futures edged up 22 cents, or 0.31%, to settle at $70.78 per barrel, while US West Texas Intermediate (WTI) crude gained 26 cents, or 0.39%, to close at $67.16 per barrel. Meanwhile, US crude inventories rose by 1.7 million barrels last week to 437 million barrels, exceeding analyst expectations of a 512,000-barrel increase. 

FX Today:

  • Euro Retreats as Dollar Strengthens Post-Fed Decision: The euro slipped against the dollar on Wednesday, with EUR/USD closing at 1.0899, down 0.41%, as markets reacted to the Federal Reserve’s reaffirmation of its policy stance. The pair briefly climbed to 1.0945 before reversing as US Treasury yields edged lower and the dollar found renewed demand. Meanwhile, data from the eurozone showed that inflation slowed to 2.3% in February from 2.5% in January, reinforcing expectations that the European Central Bank may lean toward rate cuts later this year. If EUR/USD maintains support at 1.0900, another test of 1.0950 could be on the horizon, but a move below 1.0860 might open the door for further downside toward 1.0800.
  • Pound Fails to Hold 1.3000 Amid Cautious Fed Outlook: The British pound lost ground against the US dollar, ending Wednesday at 1.2997, down 0.03%, after failing to sustain a push above the psychological 1.3000 level. The pair briefly touched 1.3014 but encountered strong resistance, leading to a pullback as investors digested the Fed’s stance on monetary policy. With the pound still trading above key moving averages—its 50-day SMA at 1.2568, 100-day SMA at 1.2625, and 200-day SMA at 1.2780—the broader trend remains positive. If GBP/USD holds above 1.2950, another challenge of 1.3000 is likely, but a break below this level could trigger a drop toward 1.2900, with stronger support at 1.2780.
  • Yen Firms as USD/JPY Struggles to Maintain 150.00: The Japanese yen gained ground against the US dollar, with USD/JPY closing at 148.81, down 0.30%. The pair had briefly risen to 150.14 but was unable to sustain the move, leading to a retreat as risk sentiment remained cautious following the Fed’s policy announcement. The Bank of Japan kept its key interest rate steady at 0.5%, in line with expectations, while traders weighed the potential impact of US tariffs on Japan’s economy. USD/JPY remains below its major moving averages, with the 50-day SMA at 152.29, the 100-day SMA at 153.18, and the 200-day SMA at 151.87. If the pair continues to struggle below 149.50, further declines toward 148.00 could be in store, while a recovery above 149.50 may push the pair back toward the 150.50 resistance zone.
  • Gold Hits Record High Above $3,050 as Investors Seek Safe Haven: Gold extended its rally to new all-time highs on Wednesday, closing at $3,047.08 after reaching an intraday peak of $3,052.10. The metal gained 0.42% as demand for safe-haven assets remained strong following the Fed’s decision to hold rates steady and acknowledge increased economic uncertainty. Gold is maintaining a bullish trend, trading well above its moving averages, with the 50-day SMA at $2,853.01, the 100-day SMA at $2,750.91, and the 200-day SMA at $2,625.51. If the metal sustains its position above $3,050, further upside toward $3,080 is likely. However, failure to hold these levels could lead to a pullback toward $3,020, with additional support near $2,980. 

Market Movers:

  • Boeing Surges on Optimistic Cash Flow Outlook: Boeing (BA) led gains in the Dow, jumping more than 6% after the company’s CFO stated that first-quarter cash burn could be “hundreds of millions” of dollars better than expected as working capital improves.
  • Tesla Rallies as California Approves Ride-Hailing Services: Tesla (TSLA) surged more than 4% after receiving approval from California regulators to begin carrying passengers in its autonomous vehicles, a key step in its expansion into ride-hailing services.
  • Travel Stocks Rebound After Powell Highlights Strong Economy: Royal Caribbean (RCL) surged more than 5%, while Carnival (CCL), Expedia (EXPE), United Airlines (UAL), and Norwegian Cruise Line (NCLH) all jumped over 4% following Powell’s comments on economic strength.
  • Signet Jewelers Soars as Sales Rebound After Weak Holiday Season: Signet Jewelers (SIG) skyrocketed more than 17% after reporting an improvement in sales trends and issuing upbeat first-quarter revenue guidance of $1.50 billion to $1.53 billion.
  • Affirm Holdings Jumps on Analyst Upgrade to ‘Buy’: Affirm Holdings (AFRM) surged more than 9% after Compass Point Research & Trading upgraded the stock to a ‘Buy’ rating and set a price target of $64.
  • HealthEquity Drops After Weak Earnings Report: HealthEquity (HQY) tumbled more than 16% after missing earnings expectations, reporting Q4 adjusted EPS of 69 cents versus consensus of 71 cents, and issuing a weaker-than-expected full-year forecast.
  • Intel Falls After Taiwan Semiconductor Dismisses Collaboration Reports: Intel (INTC) plunged over 6% after a Taiwan Semiconductor Manufacturing Co. board member denied reports of a potential collaboration between the two companies, sparking investor concerns.

Markets ended the day on a strong note, with the Dow surging nearly 400 points, the S&P 500 climbing over 1%, and the Nasdaq leading gains with a 1.41% jump as investors cheered the Federal Reserve’s decision to maintain its outlook for two rate cuts in 2025. Treasury yields edged lower, reinforcing expectations of looser monetary policy later in the year, while gold hit a record high above $3,050 as uncertainty persisted. Oil prices remained steady as traders weighed economic concerns against shifting demand expectations. Meanwhile, European markets closed mixed, with Germany’s DAX slipping on defence sector losses. As investors digest the Fed’s latest policy stance and monitor inflation trends, market direction will likely be shaped by upcoming economic data and global trade developments in the weeks ahead.