ASX 200 rockets amid US Fed's 'surprising willingness' for 2024 rate cuts

ASX 200 shares are enjoying an early Santa Clause rally with due thanks to US Fed chair Jerome Powell.

A group of friends party and dance in the desert with colourful confetti all around them.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The S&P/ASX 200 Index (ASX: XJO) is off to the races today, up 1.4% in late morning trade.

And ASX tech shares are enjoying an even stronger run, with the S&P/ASX All Technology Index (ASX: XTX) up 1.7% at this same time.

Investor exuberance is sending most ASX 200 shares sharply higher on Thursday following the overnight decision by the United States Federal Reserve to keep interest rates on hold. This marks the third consecutive Fed meeting that's seen the central bank hold tight.

The decision by the Federal Open Market Committee (FOMC) to keep the benchmark US interest rate in the target range of 5.25% to 5.50% was unanimous.

And it sent US stocks soaring as well. The S&P 500 (INDEXSP: .INX) closed up 1.4%, with the tech heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) also gaining 1.4%.

And the Dow Jones Industrial Average (INDEXDJX: .DJI), also ending the day up 1.4%, closed at a new all-time high, exceeding the prior record set back in January 2022. The Dow is now up 14% since 27 October.

Commenting on the market rally that's also offering some heady tailwinds to the ASX 200 today, Eric Beiley, executive managing director of wealth management at Steward Partners Global Advisory, said (quoted by Bloomberg):

Beaten up stocks that are tied to the health of the economy have come back to life, with investors growing even more confident that the peak interest-rate cycle is over.

Stocks that have been hit by high rates are starting to recover. If anything, rates are likely headed lower next year, which is supportive for stocks.

What did the Fed indicate to spur the ASX 200 higher?

ASX 200 investors are joining their US counterparts and hitting the buy button after Fed chair Jerome Powell indicated that inflationary pressures in the world's top economy were easing while the nation had so far avoided a big increase in unemployment.

The FOMC noted that with the Fed's tightening policies, inflation "has eased over the past year but remains elevated". And Powell did caution that, "No one is declaring victory; that would be premature."

Still, the increased prospect of several rate cuts from the world's most influential central banks in 2024 saw the Dow finish in record territory overnight and is helping the ASX 200 put in a smashing day today.

"The FOMC showed a surprising willingness to endorse market pricing of rate cuts. The forecast in the latest SEP reflects a total embrace of the soft-landing scenario," Bloomberg economists Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou noted.

Brent Donnelly, president of Spectra Markets, added, "Powell gave a nod to the outside chance of another hike, but sent a clear signal that the FOMC has changed direction, and the question is not if they cut, but when."

If ASX 200 investors were hoping for a Santa Clause rally, Powell may have just delivered it.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Share Gainers

Guess which ASX 200 stock turned $5,000 into $34,264 in just three years!

Investors have been piling into this ASX 200 stock for years, sending the share price soaring.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why Beach Energy, Meeka Metals, Monash IVF, and Qantas shares are racing higher today

These shares are having a better day than most on Thursday. But why?

Read more »

Female miner in hard hat and safety vest on laptop with mining drill in background.
Broker Notes

Experts reveal 2 buys and 1 sell in the ASX 200 materials sector

And they're not all mining companies, either.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Betmakers, Cettire, Johns Lyng, and Vulcan shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A smiling miner wearing a high vis vest and yellow hardhat does the thumbs up in front of an open pit copper mine.
Broker Notes

Why Macquarie expects this ASX All Ords copper stock to soar 48% in a year

Macquarie forecasts another big year of gains ahead for this ASX All Ords copper stock. But why?

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Broker Notes

How much upside does Macquarie expect for Steadfast Group shares?

The broker has given its verdict on this blue chip.

Read more »

Female miner standing smiling in a mine.
Broker Notes

Why Macquarie predicts Pilbara Minerals shares could surge 71%

Macquarie forecasts a big rebound ahead for Pilbara Minerals shares. Let’s find out why.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Share Market News

Down 90% from its 2021 peak, can IDP Education shares turn around?

Is this beaten down stock a buy? Let's find out.

Read more »