U.S. stocks surged on Wednesday as the Federal Reserve reaffirmed its forecast for two interest rate cuts this year, boosting investor confidence. The S&P 500 recovered further from its recent downturn, which briefly pushed it into correction territory in late February.
The Dow Jones Industrial Average climbed 383.32 points (0.92%) to close at 41,964.63. The S&P 500 gained 1.08%, ending at 5,675.29, while the Nasdaq Composite led gains, advancing 1.41% to 17,750.79.
Fed Holds Rates Steady, Maintains Rate Cut Projections
As widely expected, the Federal Reserve kept its benchmark federal funds rate unchanged at 4.25%-4.50%. However, it reiterated its outlook for two rate cuts by the end of 2025, despite acknowledging growing uncertainty in the economic outlook.
“The economy is strong overall and has made significant progress toward our goals over the past two years,” Fed Chair Jerome Powell stated in a press conference. He highlighted that while inflation has moved closer to the 2% target, it remains somewhat elevated. Powell also reassured markets that the impact of tariffs on inflation would likely be short-lived.
Investors welcomed the Fed’s stance, interpreting it as a signal of economic resilience and controlled inflation. “The most important thing to recognize is that the information was almost exactly what people had expected,” said Michael Green, chief strategist at Simplify Asset Management, in an interview with CNBC.
Trade Tensions and Market Recovery
The Fed’s decision comes amid escalating trade tensions between the U.S. and its key partners. Earlier this month, President Donald Trump imposed tariffs on imports from Canada, Mexico, and China, prompting retaliatory duties from Canada and China. Temporary exemptions on some imports from Canada and Mexico are set to expire on April 2, adding further market uncertainty.
Despite the Wednesday rebound, stocks remain in recovery mode following recent losses. The Dow and S&P 500 are still down more than 6% and 7%, respectively, from recent highs. Meanwhile, the Nasdaq Composite remains 12% below its record close, reflecting ongoing market volatility.
