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Market Commentary - Foreign Markets

The Nasdaq, S&P 500, and Dow surged as the Fed kept rates unchanged but reaffirmed plans for cuts. Airline and brokerage stocks soared, while treasuries gained, pushing the 10-year yield down to 4.25%. Global markets showed mixed performance.

Stocks Rally as Fed Holds Rates Steady, Signals Future Cuts

20-Mar-2025, 10:16
The Nasdaq surged 246.67 points (1.4%) to 17,750.79, the S&P 500 jumped 60.63 points (1.1%) to 5,675.29 and the Dow climbed 383.32 points (0.9%) to 41,964.63.

The Federal Reserve kept interest rates unchanged at 4.25-4.50% but reaffirmed plans to lower them later this year, likely by 0.25% twice, bringing rates to 3.75-4.0% by year-end. Officials cited increased economic uncertainty while adjusting projections, lowering 2025 GDP growth to 1.7% and raising 2024 inflation expectations to 2.7%. Additionally, the Fed will slow its balance sheet reduction by cutting the monthly Treasury securities runoff from $25 billion to $5 billion starting in April. This move, seen as an indirect rate cut, may pave the way for further monetary easing if inflation data supports it. Experts suggest this shift could lead to a full halt in runoff by summer, strengthening the case for rate cuts.

Airline stocks strongly moved upside, with the NYSE Arca Airline Index soaring by 2.6%. Brokerage stocks were significantly strong, as reflected by the 2.4% surge by the NYSE Arca Broker/Dealer Index. Computer hardware, networking and banking stocks also saw considerable strength, moving higher along with most of the other major sectors.

Asia-Pacific stocks turned in a mixed performance Japan's Nikkei 225 Index dipped by 0.3%, while Hong Kong's Hang Seng Index inched up by 0.1%. The major European markets also ended the day mixed. While the German DAX Index fell by 0.4%, the U.K.'s FTSE 100 Index closed just above the unchanged line and the French CAC 40 Index climbed by 0.7%.

In the bond market, treasuries turned positive in reaction to the Fed announcement after seeing weakness for most of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell 2.5 bps to 4.25% after reaching a high of 4.32%.