By Stephen Culp
NEW YORK (Reuters) -The Nasdaq and Nasdaq hit record highs for a third straight session on Wednesday and U.S. Treasury yields pared earlier declines as investors weighed a market-friendly inflation report against lowered interest rate cut expectations.
The dollar lost some weakness after the US Federal Reserve concluded its two-day policy meeting by leaving interest rates unchanged and released its accompanying policy statement and Summary of Economic Projections (SEP).
The S&P 500 and Nasdaq closed sharply higher, while the blue chip Dow turned slightly negative towards the end of the session.
The more aggressive-than-expected SEP appeared to contradict the Labor Department’s closely watched CPI report released earlier in the day, which showed core prices rising at the slowest annual pace in more than three years.
“It’s a little disappointing to see this continued hawkish stance, especially on the same day that you’re getting one of the softest inflation reports in probably a few years,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “The market is going to struggle a little bit with how aggressive the Fed is, not just in light of this morning’s numbers, but last week’s numbers as well.”
At his news conference after the decision, Fed Chairman Jerome Powell acknowledged that inflation has eased significantly but is still too high and that expectations for rate cuts have been pushed back by slower-than-expected progress in returning price growth to the 2% range. central bank. goal.
“I think the key takeaway will be that the market was probably expecting the Fed to shift the dot chart from three cuts to two cuts,” Mayfield added. “Instead, it was shifted from three cuts to one cut, which is a hawkish surprise at the margins.”
Still, financial markets are pricing in a 61.5% probability of a 25 basis point rate cut in September, up from 46.8% on Tuesday, according to CME’s FedWatch tool.
The S&P 500 fell 35.21 points, or 0.09%, to 38,712.21, the S&P 500 gained 45.71 points, or 0.85%, to 5,421.03 and added 264.89 points, or 1, 53%, up to 17,608.44.
European stocks closed sharply higher after the CPI report and ahead of the Fed’s interest rate decision.
The pan-European index rose 1.08% and the MSCI index for shares around the world rose 0.86%.
Emerging market stocks rose 0.39%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.5% higher but lost 0.66%.
US government bond yields fell after the data, but rebounded somewhat after the September issue.
The U.S. benchmark last rose 19/32 in price to yield 4.3277%, up from 4.402% late Tuesday.
The 30-year bond last rose 27/32 in price to yield 4.4846%, up from 4.535% late Tuesday.
The dollar pared losses against a basket of world currencies after the central bank cut its rate cut expectations for 2024.
The rate fell 0.46%, while the euro rose 0.61% to $1.0804.
The Japanese yen strengthened 0.14% against the dollar at 156.88 per dollar, while the British pound last traded at $1.2793, up 0.42% on the day.
Oil prices edged higher, supported by simmering tensions in the Middle East and forecasts that global inventories will fall in the second half of the year.
rose 0.77% to $78.50 per barrel from $82.60, up 0.83% on the day.
Gold gained ground but lost some luster in the wake of the Fed’s updated economic projections.
added 0.2% to $2,320.76 an ounce.
