Stocks surge despite fed's efforts to temper rate cut expectations

Equities experienced widespread gains on Tuesday, shrugging off attempts by Federal Reserve officials to quell expectations of multiple interest rate cuts in the coming year.

Wall Street continued its upward trajectory, fueled by last week’s dovish pivot by the US central bank. While Asian investors initially displayed caution, sentiment turned positive as the day unfolded.

Following the release of the Fed’s “dot plot” forecast for rates, officials have actively worked to dampen market expectations of a substantial 1.5 percentage point cut in borrowing costs through 2024. San Francisco Fed chief Mary Daly expressed confidence in the current policy, stating that it was in a “good place” to bring inflation down to the bank’s two percent target. Cleveland counterpart Loretta Mester cautioned against premature assumptions, emphasizing the market’s misinterpretation of the Fed’s post-meeting statement.

Chicago chief Austan Goolsbee voiced confusion over the robust market reaction, echoing sentiments that emerged after New York Fed chief John Williams emphasized that discussions about rate cuts were premature, particularly for a March reduction, as some experts had suggested.

In the Asian markets, Shanghai, Sydney, Singapore, Mumbai, Bangkok, Wellington, Manila, and Jakarta saw gains, while Hong Kong and Taipei experienced declines. London and Frankfurt rose at the open, with Paris remaining flat.

Meanwhile, Tokyo witnessed a significant jump, and the yen weakened against the dollar as the Bank of Japan adhered to its anticipated decision to maintain its ultra-loose monetary policy. The central bank provided no guidance on its plans for the new year, dispelling recent speculation about a potential shift.

Oil prices edged down following a one percent increase attributed to concerns about Red Sea transit routes. Several companies announced their intention to avoid the area after attacks on cargo ships by Yemen’s Iran-backed Huthi rebels. The rebels, in an effort to pressure Israel over its actions in the Gaza Strip, claimed responsibility for firing on two “Israeli-linked” vessels.

In corporate developments, Nippon Steel faced a nearly three percent loss in Tokyo after revealing plans to acquire US Steel for $14.1 billion, creating the world’s second-largest steel company.