US equities bounced back at the market open following a sharp decline caused by the Federal Reserve’s unexpected outlook on interest rate cuts.
The Fed announced fewer rate reductions than anticipated, which led to a significant sell-off that weighed on US stocks the previous day.
The Dow Jones Industrial Average climbed 1% to 42,727.62, the S&P 500 increased by 0.9% to 5,924.66, and the Nasdaq Composite rose 1.1% to 19,599.36.
On Wednesday, the Federal Reserve stated it expects to implement only two rate cuts in 2025, half of its September projection, and raised inflation expectations for the first year of the new administration.
This decision triggered the largest single-day drops in the three major US indices since August.
Investors now anticipate a single quarter-point rate reduction by mid-2025 and expect fewer than two cuts in total by the end of the year, compared to last week’s projections of three rate decreases.
Sam Stovall, Chief Investment Strategist at CFRA Research, noted, “The market tends to ‘pop after a drop,’ but I wouldn’t be surprised if we end up giving back much of the gains toward the end of the day because investors don’t want to be overexposed over the weekend.”
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