Stocks opened on a positive note on Wednesday following a robust reading of Gross Domestic Product (GDP), revealing that the US economy experienced faster growth than previously reported in the third quarter, and comments from Federal Reserve officials hinted at the possibility of rate cuts happening sooner than initially anticipated by the markets.
The Dow Jones Industrial Average (^DJI) saw a nearly 0.2% increase, and the benchmark S&P 500 (^GSPC) experienced a 0.5% uptick. The tech-heavy Nasdaq Composite (^IXIC) also joined the upward trend, rising approximately 0.7%. This positive momentum followed the previous day’s gains when the three major stock gauges resumed their November rally.
The optimistic outlook for a potential policy shift gained traction after remarks from Fed Governor Christopher Waller. He stated that there was “no reason” to insist on keeping interest rates “really high” if inflation consistently shows signs of cooling. While Fed Governor Michelle Bowman held a different view, several other officials echoed Waller’s dovish comments. Notably, Chicago Fed President Austan Goolsbee expressed concerns about maintaining rates “too high for too long.”
Renowned investor Bill Ackman is among those now speculating that the Federal Reserve might initiate rate cuts earlier than expected. Ackman suggested that this move could materialize as soon as the first quarter.
Bonds extended their gains in response to the dovish comments, with the 10-year Treasury yield (^TNX) — inversely related to prices — dropping by approximately 6 basis points to around 4.28%. This marks the lowest level since September, reflecting the market’s reaction to the dovish sentiment expressed by Fed officials.
A fresh reading on the US third-quarter GDP contributed to the positive market sentiment, revealing that the US economy grew at an annualized rate of 5.2% last quarter. This figure represents a revision from the previous reading, which had indicated a growth pace of 4.9%. The upward adjustment suggests a stronger economic performance than initially estimated.
In terms of individual stocks, General Motors (GM) took center stage as its shares surged by 8% in premarket trading. The automotive giant announced plans to buy back $10 billion in shares and increase its dividend by one-third, signaling confidence in its financial position and future prospects.
In conclusion, today’s robust stocks’ rally at market opening reflects investor optimism fueled by encouraging GDP growth, coupled with the anticipation of potential rate cuts following the Federal Reserve’s suggestive signals, signaling a positive outlook for the economic landscape.
Source: Yahoo Finance
