Wall Street heaves a sigh of relief

U.S. Federal Reserve Chair Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, U.S., March 20, 2024.

Elizabeth Frantz | Reuters

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Wall Street rallies
U.S. stocks rallied to a record close Wednesday after the Federal Reserve held interest rates and maintained plans to cut three times this year. The Dow jumped 400 points, or 1.03%. The S&P 500 gained 0.89%, hitting above the 5,200 level for the first time, while the Nasdaq Composite rose 1.25%. 

Congress eyes U.S. funding into China
U.S. investments going into China is coming under more Congressional scrutiny, besides the recent move to essentially ban TikTok. After initial false starts, some in the House of Representatives are trying to move ahead on legislation to cut off the flow of American capital that’s allegedly funded China’s military development.  

Reddit prices IPO
Reddit has priced its IPO at $34 per share, in the first major social media offering since 2019. The company, which hosts millions of online forums, sold 15.28 million shares, while existing shareholders sold an additional 6.72 million. According to a press release, the offering brought in $519 million, valuing the company at close to $6.5 billion. 

Kuwait oil CEO on Red Sea crisis
The Red Sea crisis could lead to global tanker shortage, according to the  CEO of Kuwait Petroleum Corporation. “One of the things I think we may be concerned about is if this continues for another six months, that we will not have perhaps the tanker fleet available to continue to go around,” Shaikh Nawaf al-Sabah told CNBC. Still, he added, he doesn’t see a supply disruption risk in the Middle East.

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[PRO] Weight loss drugs
A new class of weight loss drugs could hit Swiss companies with strong exposure to food categories, according to Vontobel. The investment bank estimates the demand for these drugs will grow in the coming years despite the high costs. “Therefore, the most affected categories are snacks/confectionary, ‘fast food,'” the analysts said.

The bottom line

Wall Street liked what it heard from the Fed — that it’s sticking to three rate cuts for this year.

Fed Chair Jerome Powell and officials aren’t blinking yet and seem willing to cut rates as long as progress on inflation holds up.

The positive signal was reflected in sharp moves in markets, with all three major averages soaring to record closing highs. Investors heaved a sigh of relief as recent hot inflation data fueled worries it could result in fewer cuts than expected.

“Overall, though, the FOMC has stuck to its view that the underlying inflation picture is improving, notwithstanding the disappointing numbers in the past two months,” Ian Shepherdson, chairman and chief economist at Pantheon Macroeconomics said in a note.

“In other words, they view the most recent numbers as a temporary interruption rather than a change in the trend.”

Officials also sharply revised their GDP growth forecast for this year and now see the economy growing at a 2.1% annualized rate, up from the 1.4% estimate in December.

Mohamed El-Erian, Allianz chief economic advisor, said on X the Fed appears to be signaling significant patience in two ways.

First in the timeline to reach its 2% inflation target, “indicating a willingness to tolerate higher inflation for longer,” and also in the timeline to reach its target balance sheet size, demonstrated by the Fed’s openness to slow the amount of quantitative tightening in the months ahead, he added.

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“The first aspect of patience aligns with the goal of maintaining economic well-being, while the second reflects a desire to prevent liquidity-related disruptions in market functioning,” he explained.

For now, Wall Street seems to have dodged a bullet and the Fed isn’t tossing out its script on rate cut plans — at least not yet.

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