The US stock market on Thursday continued its upward trend following the Federal Reserve’s announcement to lower the interest rates by 0.25 per cent.
This move by the Fed came as a response to the once high inflation that resulted in Trump winning the Presidential elections, dropping down towards the bank’s target of 2 per cent. The rate cut brought a wave of relief in the American economy as the policymakers took note of a job market that has “generally eased”.
However, the Fed’s announcement had little impact on the market, as the cut, even with its exact magnitude, was widely anticipated by the investors.
The market was almost certain of the central bank’s decision to cut in November. Investors are closely monitoring the central bank’s next statements to gain insight into the future direction of interest rates.
The S&P 500 rose 44.06 points to 5,973.10 or 0.7 per cent up, continuing its high from Tuesday after Donald Trump’s presidential victory. The Dow Jones Industrial Average remained mostly flat, with a minute dip of 0.59 to 43,729.34, while the Nasdaq Composite jumped 285.99 to 19,269.46 or 1.5 per cent.
The central bank started lowering rates in September, when the Federal Reserve announced a 0.50 per cent rate cut and signaled that further reductions were likely.
The market’s direction even after the Fed cuts still remains uncertain as the result of Trump’s win, who is advocating for tariffs and other policies that could drive inflation higher as per economists.
Investors have already begun speculations about the Fed rate cuts for the next year. Even though lower rates can boost the economy, they may also fuel inflation.
Fed Chair Jerome Powell said that for now, nothing is changing. “In the near term, the election will have no effects” on interest-rate policy, he said.
Powell said that the Fed considers all the possible policy changes with any president and their effect on the economy and only then the officials decide on how the interest rates should be shaped.
He also noted that the policy changes to be implemented if Trump returns to the White House remain uncertain.
“We don’t guess, we don’t speculate and we don’t assume,” he said.
On Wall Street, healthcare services firm McKesson boosted the market with a 10.6 per cent rise after reporting a quarterly profit that exceeded analysts’ expectations.
Mobility service company Lyft surged 22.8 per cent after surpassing Wall Street’s sales and profit expectations, while Ralph Lauren gained 6.6 per cent as strong demand from customers in Asia and Europe helped the company deliver better-than-expected profits.
However, financial services firm JPMorgan Chase dropped 4.3 per cent, along with Goldman Sachs, which also contributed to the Dow Jones Industrial Average’s slight decline.
Smaller US stocks also emerged as market losses, with the Russell 2000 index down 0.4 per cent which previously had twice the gain expected by S&P 500.
The stock that’s become most synonymous with the president-elect, Trump Media & Technology Group, fell 23 per cent.
In the bond market, the yield on the 10-year Treasury lowered to 4.33 per cent from 4.44 per cent late Wednesday, opposing the surge it gained on the previous day.
The rise had been driven by expectations that Trump’s plans for higher tariffs, tax cuts, and deregulation could boost economic growth, increase US government debt, and lead to higher inflation.
