Wall Street’s benchmark stock index achieved its highest level in nearly two years following a clear signal from Federal Reserve Chairman Jerome Powell. He indicated that the US central bank plans to start reducing interest rates next year. This announcement has sparked optimism among investors about the prospect of decreased borrowing costs. It’s important to note that the Fed has maintained interest rates at their highest level in 22 years. However, new forecasts from Fed officials suggest a potential reduction of 75 basis points in interest rates next year, as reported by the Financial Times.
The anticipation of a quicker pace in cutting interest rates spurred a rally in US stocks and a significant decrease in Treasury yields. The benchmark S&P 500 rose 1.4 per cent, closing Wednesday at its highest since January 2022 at 4,643.70. The two-year bond yield experienced its largest daily decline since March.
Samsung Hits 15-Year Low in Profits Amid Tech Slump
Following the Fed’s announcement, the two-year Treasury yield, which is sensitive to interest rate expectations, dropped by 0.3 per cent to 4.43 per cent. The benchmark 10-year Treasury yield decreased by 0.17 per cent on Wednesday and continued to fall during Thursday morning trading in Asia, dipping below 4 per cent for the first time since August.
Powell emphasized the central bank’s commitment to approaching future interest rate decisions with caution. He based this on the expectation of slower economic growth and the “real progress” made in curbing inflation.
Samsung Electronics has reported a sixth consecutive quarter of declining operating profit, indicating weak consumer demand and casting doubt on the timing of a broader technology recovery.
South Korea’s largest company recorded a 35 per cent drop in operating profit to 2.8 trillion won ($2.1 billion), which is approximately 24 per cent lower than earlier estimates. Bloomberg noted that revenue also decreased more than expected, falling to 67 trillion won.
For the entirety of 2023, Samsung reported its lowest operating profit in 15 years. These results highlight the continued sluggish demand for smartphones and the memory chips essential to modern electronics amidst economic uncertainty. While many investors hoped for a market recovery in 2024, the outlook remains unclear. In contrast, in December, Micron Technology provided a revenue forecast exceeding expectations, suggesting that data centre construction could balance the slow PC and mobile markets.