U.S. stocks closed firmly higher Wednesday, thanks in part to a late-session rally supported by falling Treasury bond yields and a softer U.S. dollar, following a Federal Reserve rate decision that included a downgrade in GDP growth forecasts and a boost in its inflation outlook.
“The Fed is in the midst of policy fog as they await the impact from upcoming tariffs,” said Jeffrey Roach, chief economist for LPL Financial. “The updated projections are more downbeat and will place downside pressure on the dollar in the near term.”
“Despite this month’s inflation data to have risks to the upside, we should expect core inflation to decelerate by the summer, in time for the Fed to cut in June,” he added.
The S&P 500 ended 60 points, or 1.08% higher on the day, with the Dow rising 383 points and the tech-focused and rate-sensitive Nasdaq leaping 247 points, or 1.41%.
Updated at 3:28 PM EDT
Stocks are building gains following the end of Fed Chairman Jerome Powell’s press conference, which markets appear to be reading as ‘dovish’ in terms of the expected impact from tariffs on domestic inflation pressures and, by extension, supportive of near-term rate cuts.
The pullback in Treasury yields is also helping, and likely tied to the Fed’s decision to slow the pace of runoffs from the central bank’s balance sheet.
“The Fed indirectly cut rates today by taking action to reduce the pace of runoff of its Treasury holdings,” said Jamie Cox, managing partner for Harris Financial Group.
“The Fed has multiple things to consider in the balance of risks, and this move was one of the easiest choices,” he added. “This paves the way for the Fed to eliminate runoff by summer, and, with any luck, inflation data will be in place where reducing the Federal Funds rate will be the obvious choice.”
Updated at 2:56 PM EDT
Treasury bond yields are moving lower, with 2-year notes falling 10 basis points to 3.991%, following remarks from Powell suggesting inflation pressures tied to tariffs might be transitory, and fade more quickly in 2026 following the initial price shock.
Powell conceded it was difficult to make this assessment, given the limited information available on tariffs and the reciprocal levies expected on April 2, but said that transitory nature remained the central bank’s ‘base case’ for the moment.
The downside move is boosting stocks into the final hour of trading, with the S&P 500 last marked 68 points, or 1.21% higher on the session and the Nasdaq rising 288 points, or 1.48%. The Dow was last seen 418 points higher.
Updated at 2:13 PM EDT
The Federal Reserve held its benchmark lending rate steady Wednesday, while cutting its GDP growth forecast and boosting its outlook for near-term inflation amid concerns over Trump’s tariff, immigration and budget-cutting policies.
The Federal Funds rate was left between 4.25% and 4.5%, following the central bank’s last rate cut in December, a move that was fully-anticipated by analysts, and held to its broader forecast of two quarter point rate cuts between now and the end of the year.
However, the central bank also sharply lowered its 2025 GDP growth forecast, forecasting a 1.7% advance compared to December’s estimate of 2.1%.
The Summary of Economic Projections, also known as the Dot Plots, also forecast core inflation accelerating to 2.8%, up from its prior estimate of 2.5%.
Stocks extended gains following the Fed statement, with the S&P 500 last marked 35 points higher on the session, and the Nasdaq last marked 144 points higher.
Benchmark 10-year Treasury note yields eased 3 basis points 4.296% while 2-year notes were pegged at 4.088% after the Fed said it would “slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion.”
Updated at 9:36 AM EDT
The S&P 500 was marked 21 points, or 0.38% higher in the opening minutes of trading, with the Nasdaq rising 107 points, or 0.61%.
The Dow gained 126 points while the mid-cap Russell 2000 nudged 3 points, or 0.13% higher heading into this afternoon’s Fed rate decision.
“Investors are closely monitoring the potential impact that policy shifts on tariffs and government spending from the new administration might have on the financial markets,” said Joseph Gaffoglio, president and CEO of Mutual of America Capital Management.
“In addition, volatility in the markets has been compounded by concern over stretched valuations in certain sectors, especially within the AI market, as well as the outsized influence and negative performance drag of the Magnificent 7 stocks on the overall S&P 500,” he added.
Updated at 8:02 AM EDT
U.S. mortgage rates nudged higher last week as bond markets continued to price in higher inflation forecasts tied to the tariff and economic policies of President Donald Trump.
The Mortgage Bankers’ Association reported that the average rate for a conforming 30-year fixed-rate loan rose 5 basis points to 6.72% over the period ended March 14, with refinancings down 12.8% and purchase applications rising 0.1%.
“Overall, purchase application volume is up 6% compared to last year at this time,” said the MBA’s chief economist, Mike Fratantoni. “Growing inventories of homes on the market and steadier mortgage rates are supporting homebuying activity thus far this spring.”
Stock Market Today
Stocks ended sharply lower Tuesday, with the S&P 500 giving back most of its gains from earlier in the week and closing at levels seen prior to Friday’s late-session rally.
The S&P 500 ended just over 1% lower. An underwhelming keynote from Nvidia (NVDA) CEO Jensen Huang at the tech giant’s GTC event pulled the Nasdaq 1.7% lower as Meta Platforms (META) became the last of the Magnificent 7 stocks to drift into negative territory for the year.
Market focus, however, is likely to switch firmly to the Fed’s rate decision at 2 pm Eastern Time, as well as the central bank’s new Summary of Economic Projects release, better-known as the Dot Plots, with expecting the new projections to show a modest reduction in GDP growth forecasts while a nudge higher in the inflation outlook..
Fed Chair Jerome Powell will speak to the media at 2:30 pm Eastern time. Anna Moneymaker/Getty Images
Powell’s remarks to the press, and any comments he’s likely to make regarding the impact of President Donald Trump’s tariff and economic policies, will be closely scrutinized.
“Markets will be even more sensitive than usual to Powell’s comments in the press confidence, but the [chairman] knows that strong predictions or signals of future action are futile in the current environment,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “And he is unlikely to be drawn on how he would respond in hypothetical scenarios.”
“The danger of this approach, however, is markets are left with little clarity on how the [rate-policy-making Federal Open Market Committee] will respond if the trade war intensifies,” he added.
Benchmark Treasury bond yields were little changed heading into the Wednesday session, with 10-year notes trading at 4.289% and 2-year notes hovering at 4.048%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.35% higher at 106.604 but remains pinned to its early-November lows.
Gold prices, meanwhile, rose another 0.52% to hit a fresh all-time high of $3,045.69 per ounce, taking the bullion’s year-to-date gain to around 15.5%.
On Wall Street, stocks are trending cautiously higher following last night’s selloff, which pegged the S&P 500’s year-to-date decline at 4.33%, with the futures contracts tied to the benchmark indicating an opening bell gain of around 12 points.
The Dow Jones Industrial Average, meanwhile, is called 53 points higher with the Nasdaq priced for a 56 point advance.
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In overseas markets, Europe’s Stoxx 600 slipped 0.21% in midday Frankfurt trading, with Germany’s DAX down 0.23%. The market move followed yesterday’s vote in Germany’s lower house of parliament, which cleared the way for a new $550 billion defense and infrastructure fund.
Overnight in Asia, the Bank of Japan held its benchmark short-term lending rate steady at 0.5%, with Gov. Kazuo Udea noting the impact of U.S. policies on the country’s effort to reignite growth and inflation.
“Japan’s wage and price conditions are on track, possibly stronger than expected,” Udea said. “But the uncertain U.S. and global outlook makes it difficult to assess the potential impact on Japan’s economy.”
“As such, we would like to look at upcoming data in early April, to reconsider our forecasts,” he added.
The Nikkei 225 closed 0.25% lower prior to the BoJ announcement, while the regional MSCI ex-Japan benchmark fell 0.19% into the close of trading following last night’s selloff on Wall Street.
