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Wall Street Soars on Fed Policy: $40B Securities Buy Announced
11 Dec
Summary
- US markets rallied sharply Wednesday after the Federal Reserve cut rates.
- The Fed announced a $40 billion purchase of short-term securities.
- Markets anticipate a more dovish Fed chair post-2026.
Wall Street experienced a significant rally on Wednesday following the Federal Reserve's announcement of its third consecutive interest rate cut, a move largely in line with market expectations. The Dow Jones and S&P 500 saw substantial gains, with the latter nearing a record closing high. Despite the Fed projecting fewer rate cuts for 2026 and 2027 than anticipated by money markets, Fed Chair Jerome Powell effectively ruled out any possibility of rate hikes, a statement that greatly pleased investors.
The markets also reacted positively to the Fed's plan to purchase $40 billion in short-term securities starting Friday, a figure and initiation date that surpassed expert predictions. This proactive monetary easing, coupled with the prospect of increased productivity, particularly from AI, has generated considerable optimism. Investors are also factoring in the eventual leadership change at the FOMC in 2026, with a CNBC survey indicating a majority expect a more dovish approach from Powell's successor.
Reflecting the market's positive sentiment, the US Dollar index dipped below 99, while gold prices advanced as lower interest rates typically benefit non-yielding assets. Money market futures, however, still indicate a strong probability of multiple rate cuts in 2026, suggesting a potential divergence between market sentiment and the Fed's stated projections.
