Wall Street traders sent stocks to fresh all-time highs as the Federal Reserve signaled it’s on track to cut interest rates for the first time since the onset of the pandemic.

In a historic move, the S&P 500 topped 5,200 on speculation that the end of the most-aggressive Fed hiking cycle in a generation will keep fueling Corporate America’s profits. Gains in equities were almost broad-based, with areas that have been lagging this year — like small caps — rallying. Short-term Treasuries outperformed, with traders now seeing higher odds of a first Fed move in June.

Fed officials maintained their outlook for three cuts this year and moved toward slowing the pace of reducing their bond holdings, suggesting they aren’t alarmed by a recent uptick in inflation. While Jerome Powell continued to highlight officials would like to see more evidence that prices are coming down, he also said it will be appropriate to start easing “at some point this year.”

“The sum total of this ‘no news is good news’ press conference is that markets continue to have a green light to run higher,” said Chris Zaccarelli at Independent Advisor Alliance. “This Fed isn’t going to stand in the way of the bull market.”

The tech-heavy Nasdaq 100 rose 1.2 per cent, with Apple Inc. and Tesla Inc. pacing a rally in megacaps. In late hours, Micron Technology Inc. gave a strong revenue forecast, buoyed by demand for artificial intelligence hardware. Two-year yields declined seven basis points to 4.6 per cent. The dollar retreated.

Wall Street’s Reaction to Fed:

Krishna Guha at Evercore:

• No whipsaw this time. Chair Powell’s March press conference maintained and extended the “bullish-dovish message” from the first set of Fed releases.
• Big take-away: this is a Fed that wants to cut rates – not before it is responsible to do so — but as soon as it is responsible to do so.

Peter Boockvar author of The Boock Report:

• Jay Powell clearly leaned dovish today as even a strong labor market he said would not stop the beginning of rate cuts. And this is why the short-end yield fell as it did.

Sonu Varghese at Carson Group:

• The details are quite dovish, because they’re leaving rate cuts on the table even while projecting slightly higher inflation and more economic growth.

Neil Birrell at Premier Miton Investors:

• They want that soft landing and are playing the game to achieve it.

Seema Shah at Principal Asset Management:

• This Summary of Economic Projections suggests that the Fed is willing to risk cutting rates before inflation is close to target and while GDP growth is above-trend. History teaches us this is a risky path.

Whitney Watson at Goldman Sachs Asset Management:

• Despite recent bumps in the inflation road, major central banks remain on track for rate cuts in the coming months and high-quality fixed income bonds stand to benefit.

Michelle Cluver at Global X:

• Overall, this was a highly encouraging set of data that fed into markets, increasing the probability that the Fed may lower interest rates as soon as the June FOMC meeting.

Jason Pride at Glenmede:

• Make no mistake about it, the Fed still has inflation firmly in its sights. Investors should expect rate cuts to come into focus once the Fed becomes more confident that inflation is in the neighborhood of it’s 2 per cent target, which could happen in the back half of this year.

Christian Hoffmann at Thornburg Investment Management:

• Don’t take “data dependent” off of your Fed bingo card just yet. Fixed income will continue to grapple between expectations for lower rates which is good for bonds against more tolerance for inflation which is bad for bonds.”

Corporate Highlights:

• The U.S. will award Intel Corp. US$8.5 billion in grants and as much as $11 billion in loans to help fund an expansion of its semiconductor factories, marking the largest award from a program designed to reinvigorate the domestic chip industry.
•  Boeing Co. predicted a massive cash drain for the first quarter as regulatory scrutiny and slower output of its 737 Max jetliner following a January mid-air accident take their toll on its finances.
• Topgolf Callaway Brands Corp. refuted an earlier report that said it was exploring a sale of its golf-equipment arm, saying it was unaware of any of talks to sell the business.
• Short seller Hindenburg Research targeted data center owner Equinix Inc. Wednesday, alleging that the company manipulates its accounting and is selling an “AI pipe dream.” A representative for Equinix said the firm is investigating the claims.
• Chipotle Mexican Grill Inc.’s board proposed a 50-to-1 stock split to broaden the burrito chain’s investor base after a 13,000 per cent run-up in the stock since its initial public offering.
• JPMorgan Chase & Co. unexpectedly lifted its dividend 9.5 per cent in the wake of a record annual profit and as regulators signal they may rethink proposals for tightening capital rules.

Key events this week:

• Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Thursday
• Bank of England rate decision, Thursday
• U.S. Conference Board leading index, existing home sales, initial jobless claims, Thursday
• Nike, FedEx earnings, Thursday
• Japan CPI, Friday
• Germany IFO business climate, Friday
• Atlanta Fed President Raphael Bostic speaks, Friday
• ECB’s Robert Holzmann and Philip Lane speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.9 per cent as of 4:01 p.m. New York time
• The Nasdaq 100 rose 1.2 per cent
• The Dow Jones Industrial Average rose 1 per cent
• The MSCI World index rose 0.8 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.4 per cent
• The euro rose 0.5 per cent to $1.0919
• The British pound rose 0.5 per cent to $1.2781
• The Japanese yen fell 0.3 per cent to 151.24 per dollar

Cryptocurrencies

• Bitcoin rose 3.1 per cent to $65,714.01
• Ether rose 2.9 per cent to $3,375.02

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.28 per cent
• Germany’s 10-year yield declined two basis points to 2.43 per cent
• Britain’s 10-year yield declined four basis points to 4.02 per cent

Commodities

• West Texas Intermediate crude fell 2.1 per cent to $81.68 a barrel
• Spot gold rose 1.2 per cent to $2,183.50 an ounce