On Tuesday, the Standard & Poor’s 500 index surged to a new record high as investors eagerly awaited the Federal Reserve’s decision on interest rates. The benchmark index climbed 29.09 points, or 0.6%, reaching 5,178.51, surpassing its previous all-time high established just a week ago. Similarly, the Dow Jones Industrial Average saw a robust increase of 320.33 points, or 0.8%, closing at 39,110.76, while the Nasdaq composite gained 63.34 points, or 0.4%, to finish at 16,166.79. Despite earlier losses, all three indexes managed to rebound and close in positive territory.
One notable contributor to the S&P 500’s gains was International Paper, which surged by 11%, making it the top performer in the index. The company announced the appointment of Andrew Silvernail, an executive at investment firm KKR, as its new chief executive. Additionally, Unilever’s U.S. shares rose by 2.8% after the company revealed plans to spin off Ben & Jerry’s and its ice cream business while also announcing significant job cuts totaling 7,500 positions.
Nvidia, a prominent technology company, experienced significant fluctuations throughout the day. Initially weighing heavily on the market, it later became one of the main drivers of gains. Nvidia’s unveiling of new products at its developers conference the previous day impressed analysts, who anticipate the company maintaining its lead over competitors. Nvidia’s stock has soared more than threefold over the past year, largely due to growing excitement surrounding artificial intelligence technology.
Conversely, Super Micro Computer faced losses on Wall Street, dropping 9% after announcing plans to sell 2 million shares of its stock. The company, which specializes in server and storage systems used in AI and other computing, had seen its stock skyrocket from under $100 to over $1,000 within a year prior to this announcement.
Meanwhile, market attention was primarily focused on the Federal Reserve’s ongoing meeting on interest rates, with an announcement expected on Wednesday. While the consensus anticipates the Fed maintaining its main interest rate at a two-decade high, hopes remain for further rate cuts later in the year. However, recent inflation reports exceeding expectations have raised concerns, leading traders to revise down expectations for immediate rate cuts. Despite this, optimism surrounding potential rate cuts has been a key factor driving U.S. stocks to record highs, with investors hoping for relief to economic and financial pressures.
Bank of America strategists anticipate that Federal Reserve officials will likely maintain forecasts suggesting the possibility of three interest rate cuts in 2024. However, they note that it’s a close decision, with risks leaning towards signaling fewer cuts. This assessment is led by Mark Cabana and his team of strategists.
Ahead of the Fed’s announcement, Treasury yields eased in the bond market. The yield on the 10-year Treasury slipped to 4.29% from 4.33% on Monday. Generally, high yields and interest rates can negatively impact stock prices across the board, while also draining enthusiasm and investment from high-flying sectors of the market.
Bitcoin’s price has been on a downward trend since reaching a peak above $73,000 last week. The cryptocurrency, known for its extreme price volatility, fell further on Tuesday to less than $63,900.
In global stock markets, Japan’s Nikkei 225 index rose by 0.7% after the Bank of Japan made the surprising move of hiking its benchmark interest rate for the first time in 17 years. The central bank raised the rate back to a range of zero to 0.1% and implemented other changes, signaling the end of its long experiment with negative interest rates aimed at stimulating the economy and inflation. Despite this historic shift, analysts noted that interest rate policies remain accommodative.
Conversely, stocks in Hong Kong dropped by 1.2%, while those in Shanghai fell by 0.7%. This decline followed news that troubled property developer China Evergrande Group was fined $333.4 million by Beijing’s market watchdog for various violations, including falsifying revenue. The announcement raised concerns about the stability of the Chinese property market and its broader implications for the economy.