Key Highlights
- The U.S. stock market is holding near its all-time high after the Federal Reserve cut its main interest rate.
- This rate cut was expected by nearly everyone on Wall Street and aims to bolster the job market.
- The S&P 500 rose 0.1% while the Dow Jones Industrial Average gained 248 points.
- Investors are watching for more cuts in 2026 from the Fed, as inflation remains above the 2% target.
The Federal Reserve’s Rate Cut and Its Impact on Wall Street
In a move that was widely anticipated by market analysts, the Federal Reserve has cut its main interest rate to bolster the job market. The U.S. stock market responded positively, holding near its all-time high as the S&P 500 rose 0.1% and the Dow Jones Industrial Average gained 248 points, or 0.5%, by 2:05 p.m. Eastern time.
Market Reactions
Wall Street loves lower interest rates because they can boost the economy and drive up prices for investments. However, this positive reaction was relatively modest compared to previous market movements towards records, given that stock prices had already moved toward their records on the widespread assumption of such a rate cut.
Future Outlook
The bigger question now is how many more cuts may be in store for 2026 from the Fed. After voting on Wednesday’s quarter-point rate cut, Federal Reserve officials released projections indicating that one more cut by the end of next year remains likely. This projection is under scrutiny because officials had seemed unusually split about how much additional help the economy might need from lower interest rates.
With inflation remaining stubbornly above the Fed’s 2% target, some officials have been viewing it as a greater threat to the economy than job market issues. The latest vote saw two Fed officials vote against the rate cut of a quarter percentage point because they saw no current need for reducing rates, while another official wanted a deeper reduction of half a percentage point.
Bond Market Reactions
In the bond market, shorter-term Treasury yields eased slightly, indicating that investors are now more inclined toward the possibility of additional rate cuts than they were earlier. The yield on the 10-year Treasury edged down to 4.16% from 4.18% late Tuesday, while the two-year yield fell more and slipped to 3.56% from 3.61%, tracking expectations for future Fed actions more closely.
Company News
The market saw several notable movements among individual stocks. General Electric Vernova soared 15.2% after the energy company raised its forecast for revenue by 2028, doubled its dividend, and increased its program to buy back its own stock. Palantir Technologies added 3.3% following news that the U.S.
Navy would use its artificial intelligence technology in a $448 million program.
Cracker Barrel Old Country Store rose 1.7% despite swinging between gains and losses, as it reported better-than-expected results for the latest quarter but cut its forecast for revenue this fiscal year and an underlying measure of earnings. GameStop fell 4% after reporting weaker revenue than analysts expected, though its profit topped forecasts.
Global Markets
Around the world, stock markets showed mixed movements with mostly modest changes in Europe and Asia. The U.S. market’s performance continued to set a benchmark for global financial health as investors awaited further signals from monetary policymakers.
The Associated Press reports on these developments, emphasizing the ongoing interplay between economic policies and market reactions. With inflation remaining a key concern, Wall Street will continue to monitor Fed actions closely in the coming months to gauge their impact on both the job market and overall financial stability.