Stocks bounce back sharply as bets for further rate cuts build.
The U.S. stock market rallied on Wednesday, underpinned by expectations of further monetary easing by the Federal Reserve.
All of Wall Street’s major indices finished sharply higher Wednesday, regaining most of their prior day’s slump. The Dow Jones Industrial Average (NYSEARCA:DIA) rallied 181.97 points, or 0.4%, to finish at 26,346.01.
The broad S&P 500 Index (NYSEARCA:SPY) advanced 0.9% to close at 2,919.40. All 11 primary sectors finished in positive territory, with information technology leading the pack. Energy and financials also outperformed the benchmark index.
Meanwhile, the technology-focused Nasdaq Composite Index (NYSEARCA:QQQ) climbed 1% to finish at 7,903.74.
A measure of implied volatility known as the CBOE VIX (NYSEARCA:VXX) declined sharply on Wednesday, giving back most of Tuesday’s rally. VIX, which trades on a scale of 1-100, settled down 9% to 18.46. The so-called “fear index” traded as low as 17.77.
Federal Reserve policymakers were in general agreement that a rate cut was necessary last month, the official meeting minutes revealed Wednesday.
“Several participants said statistical models on the likelihood of a recession in medium-term had increased notably in recent months,” the minutes read. “Policymakers generally more concerned about risks associated with trade tensions, geopolitics and global economy.”
The U.S. central bank has two more policy meetings left this year: One in October and the final one in mid-December.
The Final Word: In light of the central bank meeting minutes, an October rate cut seems more likely, according to Fed Fund futures prices. The chance of a 25 basis-point rate cut this month now stands just under 81% according to CME Group.