In response to the dovish turn, the Dow hit a new high in the past two years and recovered all losses since the interest rate hike.

The Dow Jones Industrial Average closed at its first record high in nearly two years on Wednesday, regaining all ground lost as the Federal Reserve aggressively raised interest rates to curb inflation. Wall Street is currently more confident that the Federal Reserve has ended raising interest rates and is preparing to start cutting interest rates. It's been a dizzying return for the oldest of the three major U.S. stock indexes, which fell into a bear market in September 2022 after last hitting all-time highs in January 2022.

During this time, investors faced the largest land war in Europe since World War II - the Russo-Ukrainian war - the fastest inflation since the 1980s, and the highest interest rates since the turn of the century.

However, the Dow, seen as a barometer of the health of the U.S. economy, has been boosted in recent months by prospects for a U.S. economic recovery, falling inflation and the latest batch of strong corporate earnings reports. In November, the Dow rose 8.8%, its largest monthly gain in more than a year. Eric Beiley, executive director of wealth management at StewardPartnersGlobalAdvisory, said: "Battered stocks related to the health of the economy have regained their vitality, and investors are more confident that the peak interest rate cycle is over. The stock market, which has been hit by high interest rates, is starting to recover. If anything, it is that interest rates are likely to go lower next year, which is good for the stock market."

The Dow's gains have been driven by industrial, technology and financial stocks, with Boeing Co (BA.US), Salesforce.com (CRM.US), American Express Co. (AXP.US), Goldman Sachs Group Inc. (GS.US) and Intel Corp. (INTC.US) all posting double-digit gains since the Dow rebounded 13% from its late October lows. The Dow has gained 27% since its September 2022 lows. The S&P 500 Index is less than 2% away from its all-time high, and the Nasdaq 100 Index once exceeded its all-time high during the session, and then fell slightly.

Of course, the Dow, which contains only 30 large-cap companies, saw gains much narrower than those of the S&P 500 or Nasdaq 100, both of which have been weighed down by recent weakness in large-cap growth stocks.

Additionally, a key difference between the Dow and the S&P 500 is the way each index's constituents are weighted. The Dow is price-weighted, which means that changes in the highest-priced stocks have a greater impact on the index level than changes in the prices of lower-priced stocks. However, the S&P 500 is market capitalization weighted.

Jimmy Lee, chief executive of TheWealthConsultingGroup, said: "The Fed's moves to raise borrowing costs are expected to end, and a recession may be avoided. The stock market rebound shows that traders expect interest rates to be a tailwind, rather than a headwind as they have been in the past few years."