Wall Street liked what it heard from the Federal Reserve on Wednesday, surging to snap a recent slump on news that the central bank is standing firm on its interest rate plans.
The Dow Jones Industrial Average rose nearly 400 points at the closing bell, up 383.82 points for 0.92% gain. The S&P 500 (+1.08) and Nasdaq Composite (1.41%) rallied by more than a percentage point after the Fed's decision to hold the current rate.
Perhaps more importantly, the Fed's announcement that it is keeping its forecast at two rate cuts this year proved most encouraging for investors following a string of selloffs. Despite the downturns, analysts still predict that the odds of a recession as unlikely.
"The economy is strong overall and has made significant progress toward our goals over the past two years," Fed Chair Jerome Powell said. "Labor market conditions are solid, and inflation has moved closer to our 2% longer-run goal, though it remains somewhat elevated."
The markets have been rattled by a series of troubling economic signs, including stingy inflation, recession fears and the uncertainty created by President Donald Trump's tariff policies. Although the Fed's decision did not come as a surprise, it was welcomed news.
"The most important thing to recognize is that the information that came across was almost exactly what people had expected," Michael Green, chief strategist at Simplify Asset Management, told CNBC.
"We've now had two consecutive summers in which the inflation has been much weaker than expected, and two consecutive winter and spring periods in which inflation has been higher. That suggests that there is residual seasonality that is not being properly captured."
