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.
Image source: Getty Images
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.
