The stock market saw a significant increase on Friday, as Wall Street was boosted by investors’ anticipation of future interest rate reductions by the Federal Reserve and strong company earnings.
Due to the strong performance of technology stocks, the S&P 500 increased by 1.2% to reach a new record of 4,839. This surpassed the index’s previous high of 4,796 in January 2022. The Dow Jones Industrial Average also reached new heights, rising by 1.1% or nearly 400 points, and marking its second record high since December. The Nasdaq Composite saw a 1.7% increase.
Greg McBride, chief financial analyst for Bankrate, stated via email that when the stock market reached its previous peak, the Federal Reserve had not yet started increasing interest rates to address inflation. However, in the past two years, there have been the most rapid interest rate hikes in four decades. As inflation is now approaching the desired rate of 2%, attention has shifted to when the Fed will start reducing interest rates.
How the U.S. avoided a recession in 2023
One of the main concerns for the Federal Reserve is the stability of inflation expectations among households. There has been a fear that these expectations could rapidly increase and create a harmful cycle that leads to sustained high inflation.
At the beginning of the week, economists from Goldman Sachs began…
forecasting the actions of the central bank
It is probable that the benchmark interest rate will decrease in March and there will be a total of five cuts throughout the year.
The investment bank predicts that the American economy will experience a smooth and gradual slowdown.
With a slight deceleration in the rate of economic growth, and a decrease in inflation expected for this year, Goldman predicts that the central bank will slowly lower interest rates. This will result in a gradual decline in borrowing expenses for both individuals and companies.
According to John Lynch, the main investment strategist for Comerica Wealth Management, the strong profits of companies and the projected decrease in interest rates are probable factors in driving market growth in 2024.
The report was made with contributions from the Associated Press.
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