Why Stocks Could Blow Past Record High and Keep Soaring

The Dow Jones Industrial Average spiked more than 500 points to eclipse the 37,000 mark for the first time on Wednesday, following the Federal Reserve's last meeting of the year.

The 30-stock average closed at 37,090, surpassing its record closing of high 36,888 in January 2022. The Dow was up 1.40%, the S&P 500 was up 1.137% and the Nasdaq Composite was up 1.38%.

Fed policymakers decided to hold rates steady for their third consecutive meeting, adding further evidence that they are near the peak of their rate-hiking cycle. They also signaled that rate cuts may be on the way next year, as widely expected by the market.

"Markets reacted positively to the dovish messaging, with equities rising and Treasury yields falling immediately following the release," said Sam Millette, director of Fixed Income for Commonwealth Financial Network in Waltham, Massachusetts.

The Fed held its key rate at a 22-year high of 5.25% to 5.5%, as expected, but its voting members also forecast three interest rate cuts in 2024.

"We are likely at or near the peak rate for this cycle," Fed Chairman Jerome Powell said at a press conference following the central bank's announcement.

Wall Street has been betting on for months that the Fed is done raising rates and cuts are likely coming next year. That was confirmed today. The market has been expecting rate reductions to begin as soon as March, according to the CME FedWatch Tool, which is based on Fed funds futures trading.

With the economy holding strong, the labor market proving resilient and interest rates soon to be coming down, stocks will likely continue to soar, said Fred Taylor, managing director and partner at Beacon Pointe Advisors' Denver office.

"Powell said what the market wanted to hear," Taylor said. "The path of least resistance is up."