U.S. stocks rally, yields slip, after Fed cuts rates 50 bps
Main U.S. indexes green after Fed cuts rates by 50 bps
Dollar falls; crude dips; bitcoin, gold gain
U.S. 10-Year Treasury yield edges up to ~3.66%
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U.S. STOCKS RALLY, YIELDS SLIP, AFTER FED CUTS RATES 50 BPS
The Federal Reserve cut interest rates by half of a percentage point on Wednesday, kicking off what is expected to be a steady easing of monetary policy with a larger-than-usual reduction in borrowing costs that followed growing unease about the health of the job market.
"The committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance," policymakers on the U.S. central bank's rate-setting committee said in their latest statement, which drew a dissent from Governor Michelle Bowman who favored only a quarter-percentage-point cut.
In response, the S&P 500 index .SPX has traded at an intraday record high, and is now up around 0.5% on the day vs roughly flat in the moments just before the FOMC statement was released.
Over this short period of time, gold stocks .HUI, regional banks .KRX and small caps .RUT are among outperformers.
The U.S. 10-year Treasury yield US10YT=RR is now around 3.66% vs around 3.69% just before the statement came out. The yield ended at 3.642% on Tuesday.
According to the CME's FedWatch Tool, there is a bias for rates to be in the 4.00%-4.25% area with the December FOMC meeting vs the current target rate of 4.75%-5.00%.
Regarding the statement, Ryan Detrick, chief market strategist at Carson Group, said:
"The Fed didn’t rock the boat too much, 50 bps was expected. The reality is the Fed understands the slowing of the labor market is the big worry. This 50 basis point cut is the Fed acknowledging that inflation isn't a major problem anymore. And now they can focus on the weakening labor market."
Detrick added "All in all, the market wanted to hear a dovish tone from the Fed and this 50 basis point cut, along with the somewhat dovish statement is exactly what the market was looking for."
He added "But when you look at the dot plot, 50 basis points of cuts this year with another 100 basis points expected next year."
Additionally, Detrick said, "To see the jump in small caps specifically, that’s the market buying what the Fed is saying, that they will continue to cut rates next year and that’s a potential tailwind to small caps. They are very sensitive to interest rates."
"We’re looking for a dovish tone from Powell more color on inflation. And the weakening or softening of the labor market. Those are some things we're we have our eyes on."
Investors now await Fed Chair Powell's press conference at 2:30 pm ET.
(Terence Gabriel, Stephen Culp)
*****
FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:
GIVEN UNCERTAINTIES, MAYBE BEST TO PLANT IN DIVIDEND GROWERS - CLICK HERE
FORMER FED TRADER SEES 25 BP RATE CUT - CLICK HERE
AMID LAST WEEK'S BIG GAINS, BOFA CLIENTS WERE SMALL NET SELLERS - CLICK HERE
DISTRESSED DEBT PERFORMANCE TO IMPROVE, ALTERNATIVE ASSETS TO CROSS $30 TRLN BY 2030 - PREQIN - CLICK HERE
GETTING THE HOUSE IN ORDER: HOUSING STARTS/PERMITS, MORTGAGE DEMAND - CLICK HERE
WALL STREET STALLS AT STARTING LINE AS INVESTORS HOLD THEIR BREATH FOR FED - CLICK HERE
MOMENTUM OUT FRONT, BUT IS THERE A SHIFT AFOOT? - CLICK HERE
THE UNBEARABLE WRONG-NESS OF FED WATCHING - CLICK HERE
SOFT LANDING TO BENEFIT GROWTH STOCK LAGGARDS - UBS CIO - CLICK HERE
WHAT NEXT AFTER THE FIRST FED CUT? - CLICK HERE
ALL GOOD FOR EURO AREA LIQUIDITY… FOR NOW - CLICK HERE
NOVO WEIGHS, AWAITING THE FED - CLICK HERE
EUROPE BEFORE THE BELL: THE FED, MIDDLE EAST AND UK CPI - CLICK HERE
TRADERS STILL GUESSING IN FINAL FED COUNTDOWN - CLICK HERE
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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