2024-09-18 21:27:27
The main stock market indices showed intense nervousness at the end of the session, as they rose immediately after the announcement, but this was stopped by the statements of the President Jerome Powell.
The rally that spurred their moment S&P 500 and Dow Jones at record levels halted after the Fed signaled it would be in no rush to ease monetary policy after cutting 50 basis points. Fed Chairman Jerome Powell warned that the market should not take the continuation of 50 basis point interest rate cuts for granted.
While this isn’t necessarily a negative given that big rate cuts are accompanied by financial crises, traders pushed stocks back near the session’s lows. However, there were some concerns that the US central bank is trying to pre-empt a possible economic slowdown.
The Dow Jones closed down 103.08 points, or 0.25%, at 41,503.10, but gained 375.79 points immediately after the Fed’s announcement.
The S&P 500 fell 0.3% to close at 5,618.26. The Nasdaq recorded a corresponding drop at 17,573.30 points. The S&P 500 and Dow Jones hit all-time highs immediately after the decision, only to retreat immediately.
The Federal Reserve cut its benchmark interest rate to a range of 4.75% to 5%, its first rate cut in four years, as inflation eased from two-year highs.
“The Commission has become more confident that inflation is moving steadily towards the 2% target and considers that the risks to the achievement of the two targets of inflation and employment are roughly balanced,” the statement said.
Traders were hoping for a 50 basis point cut instead of the traditional 25 basis point cut, and they finally got what they were hoping for, but stocks failed to hold on to their gains.
“The decision to cut by 50 basis points suggests that the Fed has gained the confidence it wanted that the downward trend in inflation is stable and may now turn its attention to avoiding potential negative effects on the economy from keeping interest rates too high levels for too long,” says Philip Strael, chief investment officer at Morningstar Wealth.
Fed Chairman Jerome Powell sought to dispel concerns that the central bank cut interest rates aggressively because it sees something troubling about the economy. He emphasized that this move is attributed to the fact that the upside risks to inflation have been limited to a significant extent.
“I don’t see anything in the economy right now that suggests an increased risk of a slowdown,” Powell said.
Despite this, stocks retreated. In part this is attributed to the big rise in expectations of the big drawdown in Wednesday’s session. The S&P 500 is up more than 18% this year and 2% in the past month.