DEST:OUSBSM

Stocks Rally as Traders Bet‍ on ⁤Early Fed Rate Cuts

NEW YORK, Dec 13 ⁤- U.S. stocks⁣ surged on ⁤Wednesday,⁣ fueled by growing conviction that the Federal Reserve ⁢will‌ begin​ cutting interest rates as early as March, perhaps easing pressure on the⁣ economy and ⁣boosting‌ corporate earnings.‌ The Dow Jones Industrial Average closed up 348.94 points,​ or 0.97%, at 36,170.13, while the S&P 500 gained 1.41% to 4,604.37. ‍The Nasdaq Composite led gains, jumping 1.80% to ‍14,353.05.

The dramatic shift in ⁢expectations follows softer-than-expected inflation data ⁣released tuesday and comments from Fed officials⁢ suggesting⁤ a willingness to consider rate​ cuts sooner⁢ than​ previously anticipated. traders now ⁣assign a roughly 70% ​probability to a‌ rate cut by ​the ⁣March meeting, ‌according to the CME FedWatch tool,‌ a significant jump from below 30% just‍ days ago. This pivot has triggered a broad-based rally, benefiting growth stocks especially sensitive to interest rate movements.

“The market is pricing in a much more dovish Fed ​than ‌we thought even a week ago,” said Michael Green, portfolio manager at Simplify Asset ⁢Management.”The combination of cooling inflation and a ⁤resilient economy is⁤ creating a Goldilocks scenario that investors are eager to capitalize‌ on.”

The yield on the 10-year Treasury note fell sharply to 4.13%, further supporting​ risk assets. Technology stocks saw substantial gains, with Apple rising 1.8%, Microsoft adding 2.1%,and Amazon climbing 2.4%.⁣ Financials also benefited from‌ the prospect of ⁢lower⁢ borrowing costs, with ‌JPMorgan Chase up 1.3%.

However, analysts caution that the rally may be overextended and vulnerable to a correction if economic data surprises to the‍ upside or Fed ⁤officials push​ back against the aggressive pricing​ of rate cuts. The Fed is scheduled to hold its next policy meeting December 12-13, and ‍while no rate ​changes are expected at this‌ meeting,‌ the accompanying economic projections and chair Jerome Powell’s press conference ⁤will be closely scrutinized for further clues about the ⁣central bank’s future path.

The market’s reaction underscores ‌the sensitivity to inflation data and Fed policy⁤ signals.⁣ Investors will be closely watching upcoming reports ⁤on employment, ⁢consumer spending, and manufacturing ‌activity for further confirmation of ‌the disinflationary trend. A sustained easing‍ of inflationary pressures ‍would likely solidify expectations for early rate⁢ cuts, potentially setting the stage for a⁤ continued rally in the new year.