Market Rally Continues as Fed Cuts Interest Rates
The S&P 500 and Nasdaq Composite indices reached new record highs on Thursday, driven by a tech-led rally following the Federal Reserve’s decision to cut interest rates by 25 basis points. The move brings the benchmark rate to a range of 4.5% to 4.75%. The Dow Jones Industrial Average also rose, albeit more modestly.
Tech Stocks Lead the Way
Shares of chip heavyweight Nvidia and e-commerce giant Amazon surged to new highs, leading the market rally. The “Magnificent Seven” tech stocks, which include Apple, Alphabet, Microsoft, Meta, Tesla, and Nvidia, have been among the biggest movers this week, with the Roundhill ETF tracking these stocks hitting a fresh record high.
Fed Chair Powell: No Effect on Policy Decisions
In a press conference following the Fed’s policy decision, Chair Jerome Powell emphasized that the election results would have no immediate impact on the central bank’s policy decisions. Powell also dodged questions about his potential resignation, simply stating “no” when asked if he would step down if requested by President-elect Donald Trump.
Inflation Remains in Check
The latest reading of the Fed’s preferred inflation gauge showed year-over-year price increases remained steady, with the core Personal Consumption Expenditures (PCE) index rising 2.7% in September. While Powell noted that the data indicates significant progress, he also highlighted the importance of considering three- and six-month annualized rates of Core PCE to identify trends.
Bond Yields Take a Breather
A recent move higher in yields took a breather, with the 10-year Treasury yield falling about 8 basis points to 4.34%. Powell attributed the move higher in yields to better-than-expected economic growth rather than higher inflation expectations.
Market Reaction
The stock market’s rally following Trump’s presidential election victory may be just the beginning, with some analysts predicting a strong few months of gains ahead. Mortgage rates, which rose for a sixth consecutive week, could also be impacted by Trump’s policies. CEOs are already weighing in on how the president-elect’s policies could impact their businesses, with some expecting increased tariffs to weigh on retailers.
Earnings Season Continues
A number of companies reported earnings on Thursday, including Lyft, which soared more than 25% after beating expectations. Moderna, Warner Bros., and Hershey also reported earnings, with mixed results. Energy companies traded flattish after showing mixed results as natural disasters impacted some of their businesses.
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