S&P 500 and Dow Rally to Record Highs as FOMC Maintains Rate Cut Projections

The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.89%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.15%. 

Stocks on Wednesday shook off early losses and posted moderate gains, with the S&P 500 and Dow Jones Industrials climbing to new all-time highs and the Nasdaq 100 climbing to a 1-1/2 week high.  Stocks rallied Wednesday afternoon after the FOMC maintained its projections for 75 bp of interest rate cuts this year.  The FOMC also raised its 2024 US GDP forecast, bolstering the outlook for an economic soft landing.

The FOMC, as expected, kept the fed funds target range unchanged at 5.25%-5.50% for the fifth straight meeting and said it is waiting for greater confidence on inflation before cutting interest rates.  The FOMC raised its 2024 GDP forecast to 2.1% from a 1.4% forecast in December, and its 2024 core PCE inflation forecast to 2.6% from 2.4% in December.  They also cut their unemployment rate forecast to 4.0% from 4.1% for 2024.

The FOMC maintained their projections for three 25 bp rate cuts this year as they kept their year-end 2024 fed funds rate target at 4.625%, unchanged from December.  The FOMC also said it will continue reducing its balance sheet by as much as $95 billion per month.

Fed Chair Powell said it's appropriate to start easing "at some point this year" and that recent inflation data suggest the Fed was right to wait before cutting interest rates. 

US weekly MBA mortgage applications fell -1.6% in the week ended March 15.  The purchase mortgage sub-index fell -1.2%, and the refinancing sub-index fell -2.5%.  The average 30-year fixed rate mortgage rose +13 bp to 6.97% from 6.84% in the prior week.

The markets are discounting the chances for a -25 bp rate cut at 15% for the April 30-May 1 FOMC meeting and 81% for the meeting after that on June 11-12.

Overseas stock markets Wednesday settled mixed.  The Euro Stoxx 50 closed down -0.15%.  China's Shanghai Composite closed up +0.55%.  Japan's Nikkei Stock Index was closed for the Vernal Equinox Day holiday.

Interest Rates

June 10-year T-notes (ZNM24) on Wednesday closed up +9.5 ticks.  The 10-year T-note yield fell -2.2 bp to 4.271%.  June T-notes Wednesday posted moderate gains after the FOMC maintained its projections for 75 bp in interest rate cuts this year.  T-notes also had carryover support by rallies in European government bonds.  Gains in T-notes were limited after the FOMC raised its 2024 US GDP and core inflation forecasts.

European government bond yields Wednesday moved lower.  The 10-year German bund yield fell -1.8 bp to 2.432%.  The 10-year UK gilt yield fell -4.2 bp to 4.016%.

German Feb PPI fell -0.4% m/m and -4.1% y/y, weaker than expectations of -0.1% m/m and -3.8% y/y.

The Eurozone Mar consumer confidence indicator rose +0.6 to a 2-year high of 14.9, stronger than expectations of -15.0.

ECB President Lagarde said the ECB can't commit to further reductions in borrowing costs after a likely first rate cut in June, and "even after the first rate cut, we cannot pre-commit to a particular rate path."

US Stock Movers

Paramount Global (PARA) closed up more than +4% to lead gainers in the S&P 500 after the Wall Street Journal reported that Apollo Global Management offered $11 billion for Paramount’s film and TV studio. 

Airline stocks rallied Wednesday after UBS initiated coverage of American Airlines Group with a recommendation of buy with a price target of $19.  As a result, American Airlines Group (AAL) and United Airlines Holdings (UAL) closed up more than +4%.  Also, Delta Air Lines (DAL) closed up more than +3%, and Alaska Air Group (ALK) and Southwest Airlines (LUV) closed up more than +2%. 

Cruise line operators moved higher Wednesday after Bloomberg Intelligence said growth in advanced bookings and high occupancy rates signal improving margins for the sector.  As a result, Carnival (CCL) and Royal Caribbean Cruises (RCL) closed up more than +4%, and Norwegian Cruise Line Holdings (NCLH) closed up more than +3%.

Trade Desk (TTD) closed up more than +4% after Walt Disney said it would sell ads through the company’s OpenPath technology.

FMC Corp (FMC) closed up more than +3% after UBS upgraded the stock to buy from neutral with a price target of $84. 

Mobileye (MBLY) closed up more than +7% on news that Volkswagen is deepening its partnership with the company to develop automated driving functions.

PDD Holdings (PDD) closed up more than +3% after reporting Q4 revenue of 88.9 billion yuan ($12.4 billion), well above the consensus of 79.9 billion yuan. 

Chipotle Mexican Grill (CMG) closed up more than +3% after its board approved a 50-for-1 stock split. 

Nasdaq (NDAQ) closed down more than -2% to lead losers in the S&P 500 after holder Borse Dubai Ltd offered 27 million shares of the stock between $58 and $60 a share. 

Amcor Plc (AMCR) closed down more than -2% after CEO Delia said he is retiring on April 15 for health reasons. 

Equinix (EQIX) closed down more than -2% after Hindenburg Research said it was short the stock. 

Energy producers and energy service providers were under pressure Wednesday after WTI crude prices fell more than -2%.  As a result, Chevron (CVX) closed down more than -1% to lead losers in the Dow Jones Industrials.  Also, Sempra (SRE) and Hess Corp (HES) closed down more than -1%.   

Moderna (MRNA) closed down more than -1% on signs of insider selling after an SEC filing showed company president Hoge sold $1.55 million shares last Friday. 

Super Micro Computer (SMCI) closed down more than -1% after offering 2 million shares of its stock at $875 via Goldman Sachs. 

Signet Jewelers Ltd (SIG) closed down more than -12% after reporting Q4 sales of $2.50 billion, below the consensus of $2.55 billion, and forecasting 2025 total sales of $6.66 billion-$7.02 billion, weaker than the consensus of $7.17 billion.

Earnings Reports (3/21/2024)

Accenture PLC (ACN), Darden Restaurants Inc (DRI), FactSet Research Systems Inc (FDS), FedEx Corp (FDX), Lululemon Athletica Inc (LULU), NIKE Inc (NKE).

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