Stan Choe
Updated ,first published
The US stock market is holding near its all-time high on Wednesday after the Federal Reserve cut its main interest rate to bolster the job market, just like nearly everyone on Wall Street expected.
The S&P 500 rose 0.1 per cent and inched closer to its record, which was set in October. The Dow Jones Industrial Average was up 248 points, or 0.5 per cent, as of 2:05 p.m. Eastern time, and the Nasdaq composite was 0.2 per cent lower.
The Australian sharemarket is set to advance, with futures at 6.20am AEST pointing to a rise of 49 points, or 0.5 per cent, at the open. The ASX dipped by less than 0.1 per cent on Wednesday. The Australian dollar was trading at US66.63¢ at 7am AEDT. The latest unemployment data will be out at 11.30am AEDT.
Investors are glued to Fed chair Jerome Powell’s press conference, which started at 6.30am AEDT.
Wall Street loves lower interest rates because they can boost the economy and goose prices for investments, even if they also can worsen inflation. The market reacted only modestly to Wednesday’s cut because stock prices had already run toward their records on the widespread assumption that exactly such a move was coming.
The bigger question remains how many more cuts may be in store for 2026 from the Fed to bolster a slowing job market.
After voting on Wednesday’s cut of a quarter of a percentage point, Fed officials released projections for where they see the federal funds rate ending 2026. The median member is penciling in one more cut by the end of next year, the same as three months earlier.
That projection is under the microscope because Fed officials had seemed unusually split about how much more help the economy may need from lower interest rates. With inflation remaining stubbornly above the Fed’s 2 per cent target, some officials had been saying it was the bigger threat for the economy rather than the job market.
In Wednesday’s vote, two Fed officials voted against the cut of a quarter percentage point because they saw no need to reduce rates now. Another official, meanwhile, voted against Wednesday’s cut because he wanted a deeper reduction of half a percentage point.
In the bond market, shorter-term Treasury yields eased a bit in an indication that investors are shading toward the possibility of more cuts to rates than they were earlier thinking.
Among the market’s big movers was GE Vernova, which flew 15.6 per cent higher 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 4.4 per cent after saying the US Navy will use its artificial-intelligence technology as part of a $US448 million ($674 million) program.
On the losing end of Wall Street was GameStop, which fell 3.3 per cent after reporting weaker revenue for the latest quarter than analysts expected. The video-game retailers’ profit topped forecasts, though.
Cracker Barrel Old Country Store rose 3.8 per cent after swinging between gains and losses. The restaurant chain caught up in a furor around its logo design reported better results for the latest quarter than analysts expected but also cut its forecast for revenue this fiscal year, as well as for an underlying measure of earnings.
In the bond market, Treasury yields eased a bit after the Fed decision.
While lower interest rates can boost the economy and send prices for investments higher, they can also worsen inflation.
With inflation remaining stubbornly above the Fed’s 2 per cent target, Fed officials are notably split about whether high inflation or the slowing job market is the bigger threat to the economy.
In the bond market, the yield on the 10-year Treasury edged down to 4.16 per cent from 4.18 per cent late on Tuesday. The two-year yield, which more closely tracks expectations for the Fed, dipped to 3.59 per cent from 3.61 per cent.
In stock markets abroad, indexes were mixed amid mostly modest movements across Europe and Asia.
AP
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