S&P 500 Index rallies as Fed keeps key rates on hold

US stocks rallied sharply this week after the Federal Reserve decided to keep interest rates steady in March. The S&P 500 Index was among the top daily gainers. Bloomberg indicates that Jerome Powell, who heads the American central bank, managed to ease investor concerns about the adverse effects of Donald Trump's trade tariffs on economic health.

In their statements, Fed officials also announced plans to shrink the regulator’s balance sheet on Treasuries from $25 billion to $5 billion starting from April 2025. 

The central bank is now taking active steps to slow the pace of its Treasury redemption, Jamie Cox from Harris Financial Group noted. This could have a dampening effect on inflation by the summer. Cox predicts the Fed may then be in a position to ease its monetary policy.

The S&P 500 Index gained 1.1% on Thursday. Meanwhile, the 10-year Treasury yield fell four bps to 4.24%.