The U.S. Central Bank, the Federal Reserve (Fed), cut the benchmark interest rate by 0.25 percentage point (P), sending the three major New York stock indexes to a higher close.
On the 10th (local time) in the New York stock market, the Dow Jones Industrial Average finished 497.46 points (1.05%) higher at 48,057.75. The Standard & Poor's (S&P) 500 rose 46.17 points (0.67%) to 6,886.68, and the tech-heavy Nasdaq composite ended 77.67 points (0.33%) higher at 23,654.16.
The market expected this Federal Open Market Committee (FOMC) meeting to be somewhat hawkish, but the Fed opted to cut rates. Explaining the reason for the cut, the Fed said, "We judge that downside risks on the employment front have increased in recent months."
However, the Fed hinted it may refrain from further cuts for the time being. On future rate decisions, it added language that it will "consider the extent and timing of additional adjustments," signaling caution on cuts.
Chair Jerome Powell also said at a news conference that the current rate level is "a good place to be while we wait and see how economic conditions evolve," adding, "We believe we are within the range of the estimated neutral rate." The neutral rate is the level the Fed views as ideal, which can be interpreted to mean additional cuts may not be necessary.
That said, the median of the rate projections on the dot plot pointed to one cut (0.25 percentage point) by the end of next year, the same as in September. It suggests there could be one rate cut next year.
According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the federal funds futures market is pricing a 43.2% chance of a 0.25 percentage point cut by April next year and a 40.1% chance of a hold. The view that rates will be on hold through the first quarter next year is dominant.
Traditional industrials and blue chips reacted positively to the Fed's rate cut. Traditional industries are more sensitive to cuts because they have heavier borrowing burdens than large tech companies. Johnson & Johnson rose more than 3% on the day.
Financials also gained on expectations that net interest margins could widen. JPMorgan Chase rose 3.19% and AmEx gained 3.20%. Goldman Sachs added 1.44%.