Stock Market Update

[BRIEFING.COM] The stock market finished strong today, leaving the major indices at fresh record highs. The S&P 500 closed above 5,200 for the first time, the Dow Jones Industrial Average jumped 400 points, and the Nasdaq Composite gained 1.3%.

The market was in a holding pattern, though, until broad based buying activity started at 2:00 ET in response to the FOMC policy announcement. The committee voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%. This was largely expected and was not the reason for increased buying activity.

The favorable reaction was in response to the closely-watched dot plot included in the updated Summary of Economic Projections (SEP), which showed that the Fed still anticipates three rate cuts this year despite recent inflation readings coming in hotter than expected. 

Fed Chair Powell's press conference didn't deter the initial influx of buying. In fact, buying activity increased further while Mr. Powell was speaking. He largely reiterated prior comments, indicating that the Fed needs more evidence that inflation is moving toward the 2% target before cutting rates. Mr. Powell also said that it will be appropriate to slow the pace of asset runoff fairly soon.

Rate cut expectations moved up today. The implied likelihood of a June cut rose to 73.5% from 64.7% earlier today and 59.1% yesterday, according to the CME FedWatch Tool.

Just about everything participated in the afternoon rally. Advancers lead decliners by a than 5-to-1 margin at the NYSE and by a 3-to-1 margin at the Nasdaq. The equal-weighted S&P 500 closed up 0.9%.

Nine of the 11 S&P 500 sectors closed higher and six of them rose at least 1.0%. The consumer discretionary sector logged the largest gain, up 1.5%, followed by the communication services sector (+1.3%).

Treasuries also responded favorably to the FOMC decision today. The 2-yr note yield, which is most sensitive to changes in the fed funds rate, dropped eight basis points to 4.61% and the 10-yr note yield declined two basis points to 4.27%.

• S&P 500:+9.5% YTD
• Nasdaq Composite: +9.0% YTD
• S&P Midcap 400: +5.7% YTD
• Dow Jones Industrial Average: +4.7% YTD
• Russell 2000: +2.3% YTD

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index -1.6%; Prior 7.1%
• Weekly EIA Crude Oil Inventories showed a draw of 1.95 million barrels following last week's draw of 1.54 million barrels.

Thursday's economic calendar features:

• 8:30 ET: Weekly Initial Claims (Briefing.com consensus 216,000; prior 209,000), Continuing Claims (prior 1.811 mln), and Q4 Current Account Balance (Briefing.com consensus -$209.5 bln; prior -$200.3 bln)
• 9:45 ET: Flash S&P Global U.S. Manufacturing PMI (prior 52.2) and flash S&P Global U.S. Services PMI (prior 52.3)
• 10:00 ET: February Existing Home Sales (Briefing.com consensus 3.92 mln; prior 4.00 mln) and February Leading Indicators (Briefing.com consensus -0.2%; prior 0.4%)
• 10:30 ET: Weekly natural gas inventories (prior -9 bcf)