Stocks surge after Fed indicates more rate cuts

All three major indexes were on pace to close at all-time highs on Wednesday afternoon, as investors cheered the Federal Reserve’s statement that it still expects three interest rate cuts this year, reports CNN.

The S&P 500 gained 0.7 per cent , reaching an intraday record of 5,200 for the first time. The Dow rose 345 points, or 0.9 per cent , and the Nasdaq Composite added 1.1 per cent .

Investors worried that the Fed could forecast fewer than three rate cuts this year, as economic reports in recent months has shown that inflation remains elevated and the labor market strong. Stocks teetered leading up to the Fed’s latest decision, but began to climb soon after.

The Federal Reserve’s decision may be disappointing to some investors, homebuyers and those with a lot of credit card debt, since movement in the Fed’s overnight lending rate influences rates — directly or indirectly — on consumer financial products (e.g., credit cards, bank loans and mortgages).

But with the Fed signaling that no rate cuts are likely until summer, it also means anyone with savings still has a couple more months to make hay off their stash.

That’s because you can still get inflation-beating interest rates that will grow any money you have set aside for emergencies, vacations, down payments or any other goal in your sights over the next several years.

However, that won’t happen if you just let it sit in a traditional checking or savings account that yields next to nothing. There are more lucrative, low-risk options out there, with rates that are still at or near their peaks. “But perhaps not for much longer,” said Ted Rossman, senior analyst at Bankrate. “If one of those fits into your financial plans, it’s best to act soon.”

Investors are still digesting Wednesday’s Federal Reserve’s policy rate decision, economic projections and Fed Chair Jerome Powell’s press conference, but so far they seem to like what they’ve seen and heard.

“Despite projections of stronger growth, lower unemployment, and slightly higher core PCE inflation, policymakers still anticipate three rate cuts this year,” wrote Whitney Watson, global co-head and co-chief investment officer of Fixed Income and Liquidity Solutions at Goldman Sachs Asset Management in a note on Wednesday afternoon.

Goldman Sachs lowered its estimates from four to three rate hikes earlier this week.

“The slight rise in the longer-run policy rate forecast is both negligible and noteworthy. It is negligible because market expectations are already much higher, but noteworthy as it reinforces the market’s recent perception that the rate-cutting cycle may be shallower than initially anticipated,” she said.

“Overall, despite recent bumps in the inflation road, major central banks remain on track for rate cuts in the coming months and high-quality fixed income bonds stand to benefit.”

Meanwhile, earlier in March, India’s Reliance Industries had agreed to buy Paramount’s entire 13.01 per cent stake in local entertainment network Viacom 18 Media for about $517m.

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