Stock Market Soars as Federal Reserve Cuts Interest Rates
The US stock market continued its upward trend on Thursday, with all three major indexes reaching record highs after the Federal Reserve announced a quarter-percentage point cut in interest rates. This marks the second consecutive rate cut, following a significant half-point cut in September.
Fed’s Rate Decision Sparks Optimism
The Federal Reserve’s decision to lower its short-term, benchmark fed funds rate to between 4.5% and 4.75% has instilled confidence in the market. This move is seen as a sign that the Fed is committed to supporting economic growth, despite concerns about inflation and deficit increases.
Market Reaction: A Mixed Bag
The Dow Jones Industrial Average closed flat at 43,729.34, while the Standard & Poor’s 500 index ended at a record high of 5,973.10, up 0.74%. The tech-heavy Nasdaq composite index finished strong, up 1.51% at 19,269.46. The 10-year Treasury yield, which had spiked on Wednesday, fell after the Fed’s rate announcement, ending down 0.091% at 4.335%.
Fed Chairman’s Outlook: Cautious Optimism
Federal Reserve Chairman Jerome Powell expressed optimism about the economy, suggesting that more small rate cuts may be on the horizon, although the pace will remain data-dependent. Economists are divided on whether the Fed will pause rate cuts at its next meeting in December or squeeze in another quarter-point cut before a possible pause.
Earnings Reports: A Mixed Bag
In addition to the Federal Reserve’s rate decision, companies continued to report earnings this week. Some notable highlights include Pinterest, which topped third-quarter revenue and earnings estimates but provided a weak fourth-quarter revenue outlook. Rivian missed third-quarter estimates and lowered its full-year earnings outlook, while Airbnb topped third-quarter sales estimates but missed on earnings.
What’s Next for the Economy?
As the market continues to react to the Federal Reserve’s rate decision and earnings reports, investors are left wondering what’s next for the economy. With President-elect Donald Trump’s promised tariffs and tax cuts on the horizon, some economists are warning of potential inflationary pressures. Only time will tell how these factors will impact the market in the coming months.
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