Volatility was the setting for the Federal Reserve’s interest rate announcement and Chair Jerome Powell’s press conference Thursday afternoon.
The S&P 500 and Nasdaq advanced Thursday, continuing a stock market rebound since Donald Trump’s win, as the Federal Reserve lowered rates again.
The S&P 500 advanced 0.74% to end at a record of 5,973.10. The Nasdaq Composite rose 1.51% to end at 19,269.46, a level above 19,000 for the first time.
The Dow Jones Industrial Average was a shade lower, falling less than one point to 43,729.34. All three indexes reached intraday records during the session.
The moves came on top of a rally in stocks on Wednesday following Trump’s victory; the Dow Jones Industrial Average rose by 1,500 points.
The S&P 500 rose 2.53% – the biggest one-day gain after the US presidential elections. The bond market has also been on the move since the election with Treasury yields declining on Thursday after rising the day before.
Those big swings were the backdrop to the Federal Reserve’s interest rate cut Thursday afternoon. The cut was expected, although it was a quarter point and less than the 50 basis points cut made in September.
Chairman Jerome Powell of the Federal Reserve said he is feeling good about the economy and the Federal Reserve appears poised to continue with small increments.
The risk balance is quite favorable to the Fed to cut the Fed Funds rate through to at least 2025.
Markets should not look forward to getting supersized rate cuts unless the economy turns south and that doesn’t look at all likely for a while,” said Jamie Cox, managing partner for Harris Financial Group.
Wall Street usually assumes that the second Trump administration will be positive for risky assets such as equities due to his proposed tax reforms.
But the sustained large government deficits and higher tariffs have given some concern about the resurgence of inflation.
Until it becomes clearer just how extensive and how disruptive Trump’s plans are, the investor should prepare for a stock market that is trading in a range, albeit a range that is generally rising, said Tony Roth, CIO at Wilmington Trust.
“At some point, given the stretched multiples on equities and the higher income levels of bonds, we could very much have a very compressed equity risk premium and little opportunity left in the equity market.” We’re not there yet.
I think we have six months before we need to sit down and talk about it and be there,” Roth said.
Big Tech stocks rose on Thursday to support the market, with Apple and Nvidia up 2.1% and 2.3% respectively.
Meta Platforms rose 3.4%. The financials, which rose on Wednesday, retreated on Thursday. JPMorgan Chase lost 4.3% and American Express lost 2.8% in the Dow.
