Stock market today: Wall Street, relief, high rates, Dow, record

Wall Street is rising after a big rally as investors hope for several interest rate cuts coming next year.

Wall Street is on the rise once again, following a powerful rally that sent the Dow Jones Industrial Average to a record. The excitement stems from the Federal Reserve's indication that interest rate cuts investors have been hoping for may be coming next year.

In early trading, the S&P 500 was 0.6% higher, getting close to its all-time high set last year. The Dow Jones Industrial Average was up 93 points, or 0.3%, and the Nasdaq composite was 0.6% higher. Moderna jumped 13.3% after reporting positive data from a study of its treatment for high-risk melanoma, while Adobe slumped 6.4% after giving a revenue forecast for 2024 that fell short of expectations.

Stocks have been rising since October on hopes that inflation has cooled enough for the Federal Reserve to stop its market-rattling hikes to interest rates and even consider cutting them. The Fed's projections show that its median official expects the federal funds rate to fall next year by more than earlier expected. Lower interest rates are favorable for Wall Street as they can boost investment prices and ease pressure on the economy and financial system.

Hopes for easier conditions for financial markets and the economy are also rising globally, with the European Central Bank and Bank of England deciding to keep their main interest rates unchanged. In the bond market, traders are betting on a series of interest rate cuts coming in 2024, with the yield on the 10-year Treasury falling to 3.96% from 4.03% late Wednesday.

However, the rally for stocks and drop for Treasury yields hinge on the Federal Reserve's ability to manage its interest-rate policy effectively. While one threat is that the economy stays too hot, another is that the economy slows too much and slides into a recession. Reports on U.S. retail spending and jobless benefits have flagged such threats, but traders are still betting on a better than three-in-four chance that the Federal Reserve will cut its main interest rate by at least 1.50 percentage points next year.

In stock markets abroad, indexes rallied across Europe and were mixed in Asia. Japan's Nikkei 225 slumped 0.7% as hopes for U.S. rate cuts drove the value of the dollar down against the yen, which hurts Japanese exporters.

In summary, Wall Street is experiencing a powerful rally on hopes of interest rate cuts next year, driven by indications from the Federal Reserve. The global economy is also showing signs of easier conditions, with central banks in Europe and the UK keeping their main interest rates unchanged. However, the effectiveness of the Federal Reserve's interest-rate policy and potential threats to the economy remain uncertain.