A television station broadcasts the Federal Reserve's decision to leave rates unchanged, on the floor of the New York Stock Exchange on March 19, 2025.
Michael Nagle | Bloomberg | Getty Images
Stocks rallied on Wednesday, with the S&P 500 clawing back more of the rout since late February that took the benchmark briefly into correction territory, as the Federal Reserve forecast it would still cut interest rates two times in 2025.
The Dow Jones Industrial Average climbed 383.32 points, or 0.92%, and closed at 41,964.63. The S&P 500 jumped 1.08% to end at 5,675.29, and the Nasdaq Composite advanced 1.41% to settle at 17,750.79.
The central bank kept the federal funds rate at a range of 4.25% to 4.5%, a decision that was widely expected. That said, the Fed kept its outlook at two rate cuts coming in the remainder of this year, noting "uncertainty around the economic outlook has increased."
"The economy is strong overall and has made significant progress toward our goals over the past two years," Federal Reserve Chair Jerome Powell said during a press conference following the decision announcement. "Labor market conditions are solid, and inflation has moved closer to our 2% longer-run goal, though it remains somewhat elevated."
At the end of the day, traders liked that the Fed kept its outlook for a couple of rate cuts this year, as well as Powell suggesting the economy was still strong. He also said any effect from tariffs on inflation would likely be only short term.
"The most important thing to recognize is that the information that came across was almost exactly what people had expected," Michael Green, chief strategist at Simplify Asset Management, told CNBC. "We've now had two consecutive summers in which the inflation has been much weaker than expected, and two consecutive winter and spring periods in which inflation has been higher. That suggests that there is residual seasonality that is not being properly captured."
The Fed's decision comes against a backdrop of rising tensions between the U.S. and major trade partners. President Donald Trump earlier this month imposed levies on goods from Canada, Mexico and China. Canada and China have since retaliated with duties of their own.
Trump's temporary tariff exemptions on some imports from Canada and Mexico are set to expire April 2.
Investors are coming off a rough Tuesday, which saw the recent market sell-off come back in full force after two winning sessions. The Dow and the S&P 500 are more than 6% and more than 7%, respectively, below their recent closing highs. The Nasdaq, meanwhile, is roughly 12% off its record close.
