DOW hits new record as Fed holds course on three cuts, despite hawkish undertones

US stocks surged sharply higher overnight, with DOW and S&P 500 closing at new record highs. Market participants expressed relief and optimism as Fed’s maintained forecast of three rate cuts for the year. Fed Chair Jerome Powell’s remarks during the press conference further buoyed investor sentiment, emphasizing that the recent inflation data “haven’t really changed the overall story”. He affirmed that inflation is “moving down gradually”, albeit via a “somewhat bumpy road.”

Despite positive reactions from the stock markets, it’s crucial to acknowledge that Fed’s has shifted to a slightly more hawkish tone, in particular compared to December meeting. The updated dot plot revealed a narrower margin, with nine out of nineteen members now anticipating just two rate cuts for the year. Moreover, future easing path is envisioned to be more gradual than previously projected. Interest rate is expected to settle at 3.75-4.00% by the end of 2025—a slight increase from December’s forecast of 3.50-3.75%. For the end of 2026, the projection was raised to 3.00-3.25%, up from the previous 2.75-3.00%.

Technically, DOW’s up trend is now extending to 40k psychological level, and then 138.2% projection of 28660.94 to 34712.28 from 32327.20 at 40690.15. Outlook will stay bullish as long as 38483.25 support holds, in case of pullback.