Rate-Cut Optimism Drives Strong Market Rally

by Sequoia Financial Group
by Sequoia Financial Group

Despite the DJIA and the S&P 500 recording modest declines on Friday, the major equity indexes notched healthy gains last week. The S&P 500 rose 2.31% and the Dow was up 1.97%, its best week since December. The technology-heavy NASDAQ was the outperformer, rising 2.86%1. Fixed income markets also posted gains for the week with the Bloomberg US Aggregate Bond Index higher by 0.73%1 as the 10-year US Treasury bond dipped 9bps to 4.22%2.

On Thursday, all three indices posted all-time highs, along with the highest number of S&P 500 stocks hitting 52-week highs (including Fedex, Kroger, Phillips 66 and AutoZone3) in three years4. Technology stocks were also bolstered as Micron Technology jumped 14% on strong earnings and notched its best day since December 2011. The news lifted the semiconductor sector, with Nvidia and Marvell Technology adding more than 1% each. Taiwan Semiconductor and the VanEck Semiconductor ETF (SMH) surged about 2% each, while Broadcom jumped 5.6%5.

Meanwhile, shares of Apple declined last week as the Justice Department, joined by 16 state and district attorneys general, filed a civil antitrust lawsuit against Apple for monopolization or attempted monopolization of smartphone markets in violation of Section 2 of the Sherman Act6.

One of the reasons for the market’s optimism stems from last week’s Federal Reserve meeting. The central bank left the federal funds rate unchanged, with the last increase being in July 2023. Commentary from Fed Chair Jerome Powell reinforced that numerous cuts are anticipated, despite recent readings of higher inflation that led some investors to fear a path of slower monetary policy easing.

The Summary of Economic Projections (SEP), which is a compilation of the Federal Open Market Committee (FOMC) members’ projections of various economic indicators, showed that a majority of the members expected the fed funds rate would end the year in the range of 4.50-4.75%, which represents a decline of 75bps from current levels. While the members revised their expectations for US GDP higher, to 2.1% by year-end, an increase from their forecast of 1.4% in December, core PCE inflation is expected to deteriorate, moving higher by year-end to 2.6%, and further away from the Fed’s 2% target7.

Looking ahead, current market expectations are for a 25bps rate cut at the Fed’s June meeting, with a probability of 68%, according to CME Group’s FedWatch Tool8.



  1. Morningstar Direct
  2. https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202403
  3. https://www.wsj.com/market-data/stocks/newfiftytwoweekhighsandlows
  4. https://www.cnbc.com/2024/03/23/its-been-four-years-since-the-markets-covid-low-with-the-sp-500-returning-25percent-annualized-since.html
  5. https://www.cnbc.com/2024/03/20/stock-market-today-live-updates.html
  6. https://www.justice.gov/opa/pr/justice-department-sues-apple-monopolizing-smartphone-markets
  7. https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20240320.htm
  8. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

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