NEW YORK, Sept 18 (Askume) – U.S. stocks closed slightly lower on Wednesday, well below their session highs, after the Federal Reserve cut interest rates by 50 basis points to the lowest in four years and delivered the first rate cut in a longer period than expected.
Trading remained volatile. The S&P 500 was trading between marginal gains and losses before the Fed’s announcement. The benchmark index briefly rose 1% after the news was announced, then gave up gains and eventually closed lower. The Dow Jones and S&P 500 rose to session highs before weakening.
The Federal Reserve said it is “more confident” that inflation is moving toward the central bank’s 2% target andInterest rates have been cut by half a percentage point, focusing on keeping the labor market healthy .
“The Fed ending this pause with a bang is a strong signal that they have already cut interest rates by 50 basis points this year.
“The Fed estimates that extending rate cuts could lead to the unemployment rate rising to 4.4% and inflation falling to the target level sooner.”
In recent days , according to CME’s Fedwatch tool .
The Dow Jones Industrial Average (.DJI) fell 103.08 points, or 0.25%, to 41,503.10 ; the S&P 500 Index (.SPX) fell 16.32 points, or 0.29%, to 5,618.26; the IX fell 54.76 points, or 0.31%, to 17,573 from 5,618.26.
The market is currently confident that the Federal Reserve will cut interest rates by at least 25 basis points at its November meeting, and the probability of a 50 basis point cut is about 35%.
“What’s surprising to me is that when the markets get what they want, they immediately want more,” said Steve Sosnick, chief market strategist at Greenwich, Connecticut-based Interactive Brokers.
“It’s worth noting that stocks aren’t excited about expected earnings gains (at least not yet). After seven consecutive days of gains, there’s plenty of good news on the horizon.”
Borrowing costs have risen to their highest level in two decades since July 2023, when the central bank last raised interest rates by 25 basis points to 5.50% from 5.25% to tackle inflation.
After announcing the rate cut, Federal Reserve Chairman Powell said the central bank’s forecasts on interest rates do not indicate the need for immediate action.
Small-cap stocks, which may benefit more from a low interest rate environment, were higher, with the Russell 2000 Index (.RUT) outperforming other large-cap stocks, closing up 0.04% after earlier gaining 2.44%. Some of these regional banks, which have been under pressure from rising interest rates, also gained, with the KBW Regional Bank Index (.KRX) rising 3.53% to end the day up 0.46%.
The market has been on a rally this year, with all three major stock indexes hitting record highs on the prospect of rate cuts as inflation eases and the job market shows signs of cooling.
Intuitive Machines (LUNR.O) surged 38.3% after winning a $4.8 billion NASA navigation services contract .
On the NYSE, declining issues outnumbered advancing issues by a 1.14-to-1 ratio, and on the Nasdaq, declining issues outnumbered advancing issues by a 1.36-to-1 ratio.
43 S&P 500 index component stocks were at 52-week highs and no new lows; 165 Nasdaq index component stocks were at new highs and 69 were at new lows.
Volume on U.S. exchanges was 11.63 billion shares, compared with the 10.82 billion share average for the full session over the last 20 trading days.
