Dow closes nearly 500 points higher after Fed cuts rates
The Dow Jones Industrial Average jumped on Wednesday after the Federal Reserve decided to cut interest rates once again this year as traders bet more easing was ahead next year.
The 30-stock average gained 497.46 points, or 1.1%, to close at 48,057.75. The S&P 500 advanced 0.7% to end the day at 6,886.68 and briefly traded above its previous record closing high of 6,890.89. The Nasdaq Composite increased 0.3% to 23,654.16.
The Fed approved another quarter percentage point cut at the conclusion of its two-day policy meeting. The cut, which marks its third in a row, brings the federal funds rate to a range of 3.5%-3.75%.
There were a number of items Wall Street saw as bullish for equity markets in the Fed’s messaging, as well as in Chair Jerome Powell’s subsequent remarks:
Notably, the Fed announced it start buying short-term bonds, expanding its balance sheet. Short-term Treasury yields moved lower as a result.
The central bank also gave attention to the weak labor market in its statement, removing language that it “remained low.” This suggests its focus is turning to supporting the economy and away from inflation.
While Powell said the Fed would have to “wait and see” before making its next move, he also virtually ruled out any chance for a rate hike next. “I don’t think that a rate hike ... is anybody’s base case at this point,” he said.
On the flip side, the Fed forecasts only one rate cut in 2026, but traders bet they would go further. In fact, the CME Fedwatch tool showed fed funds futures pricing in a 68% chance the central bank would slash rates two or more times next year.
Source : Cnbc.com
