Benchmark indices on Wall Street had a muted reaction to the Federal Reserve’s policy decision on Wednesday night as after the initial knee-jerk fall, the close turned out to be rather subdued.
The Dow Jones ended 250 points higher, while the S&P 500 and Nasdaq closed marginally below the flat line.
On expected lines, the US Federal Reserve cut interest rates by 25 basis points, and projected two more rate cuts by the end of the year. However, contrary to market expectations of more aggressive cuts to save the economy, the central bank projected only one rate cut each in 2026 and 2027.
At one point, the Dow turned negative post Fed Chair Jerome Powell’s remarks, but stocks such as Walmart, JPMorgan and banking peers, along with American Express, which generally benefit in a low-rate environment, salvaged some gains for the 30-stock index.
On the flip side, Nasdaq, which has been an outperformer, hitting new highs nearly every day this week, saw profit booking in high-flying tech names such as Oracle Financial, Nvidia, Palantir and Broadcom. Support came from Apple and Microsoft, who generally act as flight-to-safety stocks due to their business models and strong cash generation.
The yield on the 10-year note also rose five basis points to 4.08% and tech stocks fare negatively when yields rise as most of them are valued on future profits and rising yields make those future profit projections less worthy.
The US Dollar index, which fell below levels of 97 to make a low of 96.2, reversed some of those gains to head back to the 97 mark. Gold prices saw profit booking on prospects of fewer rate cuts, but analysts believe that since demand remains strong, prices will find support at lower levels.