Dow reaches record high as Fed pivots toward rate cuts

New York (CNN) — US markets soared higher on Wednesday afternoon following the Federal Reserve’s final policy decision of the year.

The Dow rose 1.4%, closing at 37,090.24 and blazing past its previous record high of 36,799.65, reached nearly two years ago.

The S&P 500 was up 1.4% and the Nasdaq also gained 1.4% as Wall Street celebrated the US central bank’s announcement that it would keep interest rates steady after almost two years of aggressive rate hikes — and that it expects three rate cuts in 2024.

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Wednesday’s stock surge sent the Dow’s year-to-date gains to 11.9%. The S&P 500 is also about 2% from a record high and is up 22.6% so far in 2023. The tech-heavy Nasdaq Composite has soared by close to 50% so far this year.

“The major takeaway from the December policy meeting is that the Federal Reserve is forecasting a soft landing, full employment and intends to reduce its federal funds policy rate by at least 75 basis points in 2024 to support the ongoing business expansions,” wrote Joseph Brusuelas, chief economist of account firm RSM, in a note Wednesday.

“From our vantage point that is about the best holiday gift a central banker can bestow upon the investment community, policymakers and the public,” he wrote.

The CNN Business Fear & Greed Index, which looks at seven indicators of market sentiment, remained in “greed” territory as markets surged. That’s a big change from just one month ago, when the index was in “fear” territory.

Treasury yields, meanwhile, fell to their lowest level since August following the Fed’s forecast of easing interest rates. The yield on the 10-year Treasury fell by about two tenths of a percentage point to 4.018%.

Oil prices also rose more than 1% after Fed officials indicated near-future rate cuts. The relief came after both Brent and WTI, the international and US benchmarks, closed at their lowest levels since late June on Fed worries.

In corporate news, shares of Etsy fell 2.2% after the online crafts retailer announced it would lay off about 11% of its staff. The company cited a challenging economic environment as cause for the firings.

Shares of Tesla were up nearly 1% even after the company lost consumer tax credits for some of its Model 3 vehicles and was made to recall more than 2 million of its cars for autopilot issues.

Pfizer, meanwhile, fell 6.7% after the company issued weaker-than-expected guidance for 2024.