Fed Cuts Interest Rates by 0.5%:
Stocks moved higher last week following the Federal Reserve’s decision to cut its benchmark interest rate by 50 basis points on Wednesday—the first reduction in over four years. This action was reinforced by several data indicators that affirmed the Fed’s assessment of a cooling, yet resilient U.S. economy and decelerating inflation.
The S&P 500 Index gained 1.3%, while the Nasdaq Composite rose 1.4%. The Dow Jones Industrial Average moved ahead by 1.6%. The MSCI EAFE Index, which tracks developed overseas stock markets, inched up 0.4%.1,2
Source: Bloomberg Finance, L.P. (Performance data normalized 8/9/24 = 0)
Investors React
Stocks traded in a narrow range for the first half of the week as anxious investors awaited the outcome of the Federal Open Market Committee’s (FOMC) September meeting.3,4
Shortly after 2PM ET Wednesday, the Fed announced it was cutting rates by a half percentage point—a more significant cut than some investors anticipated. Stocks initially rose in response and then fell again. Some market watchers attributed this decline to investors’ worries that the Fed might be concerned about economic growth.5,6
But after sleeping on it, stocks rallied Thursday, with the Nasdaq, S&P, and Dow climbing 2.5%, 1.7%, and 1.3%, respectively. The Dow topped 42,000 for the first time, while the S&P crossed the 5,700 mark.7,8
Sources: U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Charles Schwab
The Fed’s Approach
The half-point cut was the first change in the Fed Funds Rate in 14 months and the first reduction in 4½ years, bringing its target range to 4.75-5.0%. Fed Chair Powell said the decision reflected the Committee’s “greater confidence that inflation is moving sustainably toward 2%” and that the “risks to achieving its employment and inflation goals are roughly in balance.”9
This Week: Key Economic Data
Source: Bloomberg Finance L.P.
This Week: Companies Reporting Earnings
Source: EarningsWhispers
Author
Gary Aiken
Chief Investment Officer
Concord Asset Management
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Footnotes and Sources
1The Wall Street Journal, September 20, 2024
2Investing.com, September 20, 2024
3CNBC.com, September 16, 2024
4The Wall Street Journal, September 18, 2024
5CNBC.com, September 18, 2024
6The Wall Street Journal, September 18, 2024
7The Wall Street Journal, September 19, 2024
8The Wall Street Journal, September 20, 2024
9The Wall Street Journal, September 18, 2024
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