(New York) The New York Stock Exchange continued to savor Thursday the new tone adopted by the Fed the day before which indicates that the American central bank is ready to lower interest rates next year.
The Dow Jones Index continued its record high from Wednesday, advancing 0.43%. THE
Bond yields eased further, with ten-year yields falling below 4% for the first time since late July.
The Federal Reserve left its rates unchanged on Wednesday as expected, but above all it indicated that it could lower rates three times next year, a prospect that delights the markets.
Jerome Powell, its chairman, acknowledged for the first time that the Monetary Committee had discussed the timing of rate cuts.
“The Fed has made it clear that it is ready to cut rates. It’s a paradigm shift for the market,” commented Adam Sarhan of 50 Park Investments for AFP.
“The Fed has now ended the most aggressive cycle of rate hikes it has undertaken in decades,” he added. The cost of credit was raised by 5.5 points eleven times over a year and a half.
“It seems at least for the moment that the Fed has won its fight against inflation and the market is delighted with this victory,” assures the analyst.
The sectors hitherto handicapped by high interest rates have had a burst of energy as evidenced by the sharp rise (2.62%) in the Russell 2000 index which includes small caps from Wall Street or the soaring regional banks like Zion Corporation (9.21%), Western Alliance (9.29%) or Comerica Incorporated (8.54%).
But other analysts were more circumspect in their interpretation of the market, questioning the wisdom of celebrating future rate cuts when it is synonymous with a cure for a slowdown in economic activity.
“I fear the market has gotten carried away. I’m a little afraid that he will get ahead of Santa Claus […] in this favorable season when we often talk about the “Santa Claus bull market”,” quipped Steve Sosnick of Interactive Brokers.
“On the bond side, the market continues to tell us that the Fed is cutting rates because it senses weakness in the economy, while on the stock side, the stock market thinks it is cutting rates to avoid this weakness. Which one is it? “, he worries.
The analyst recalls that the Fed forecasts growth of only 1.4% next year “but it does not say how we get there: could there be a recession with two bad quarters? “.
The bond market saw yields on 10-year Treasury notes fall to 3.91% around 4:30 p.m. ET, the lowest in more than five months after climbing to 5 % in October.
The dollar fell by 1% against the euro. Both the ECB and BoE have extended their pause on rate hikes, but do not appear ready to cut them.
On the market, shares of vaccine manufacturer Moderna soared 9.25% to $85.87. The laboratory hopes that its therapeutic vaccine against skin cancer will be approved as early as 2025, after new positive results announced on Thursday.
Software group Adobe fell 6.35% to $584.64. Adobe posted good results for the fourth quarter, the group then expects lower sales than analysts expected.
Mid-sized companies related to solar energy shone like Invesco Solar (8.14%) or Sunrun (19.92%).
Airlines soared like United Airlines ( 4.83%) and American ( 3.55%). Online car seller Carvana boosted (12.31%) to a three-month high.
