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U.S. stock markets closed lower on Wednesday after the Fed cut the benchmark lending rate by 50-basis point. Market participants were initially very enthusiastic lifting major indexes to record highs. However, investors booked profit on concerns that the big rate cut was predominantly to avoid an imminent recession. All three major stock indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) was down 0.25% or 103.08 points to close at 41,503.10, after a choppy session. In intraday trading, the blue-chip index touched an all-time high of 41,981.97. Notably, 18 components of the 30-stock index ended in negative territory while 12 in positive zone.
The tech-heavy Nasdaq Composite finished at 17,573.30, sliding 0.3% due to weak performance by technology giants. In intraday trading, the tech-laden index was up by nearly 265 points. The major loser of this index was Intel Corp. (INTC - Free Report) . The stock price of this desktop chipset giant was down 3.3%. Intel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 was down 0.3% to finish at 5,618.26. Wall Street’s benchmark is currently less than 1% below its all-time high recorded in July. In intraday trading, the broad-market index touched an all-time high of 5,689.75.
10 out of 11 broad sectors of the broad-market index ended in negative territory while one in positive zone. The Technology Select Sector SPDR (XLK) and the Utilities Select Sector SPDR (XLU) fell 0.9% and 0.8%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 5.8% to 17.18. A total of 11.63 billion shares were traded on Wednesday, higher than the last 20-session average of 10.82 billion. Decliners outnumbered advancers on the NYSE by a 1.14-to-1 ratio. On Nasdaq, a 1.36-to-1 ratio favored declining issues.
Fed Initiates a 50-Basis Point Interest Rate Cut
On Sept. 18, in its FOMC meeting, the Fed reduced the benchmark lending rate by 50 basis-points, marking the first cut of the Fed Fund rate since March 2020, at the onset of the COVID-19 pandemic. Although the first rate cut was certain in September, market participants are surprised about its magnitude. The current Fed Fund rate is in the range of 4.75-5%.
Just before the Fed’s decision, the CME FedWatch tool showed a 100% probability of a 25 basis-point cut and a 65% chance of a 50 basis-point reduction. Fed’s aggressive beginning of the low-interest rate regime has compelled a section to market researchers to raise eyebrows about the health of the U.S. economy.
In his post-FOMC meeting statement, Fed Chairman Jerome Powell said, “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.” More important, the Fed’s latest “dot-plot” shows a strong possibility of another rate cut of 50-basis point by the end of 2024. The Fed has two more FOMC meeting left this year, scheduled in November and December.
Economic Data
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported that housing starts in August came in at 1.356 million units, higher than the consensus estimate of 1.318 million units. The metric for July was marginally revised downward to 1.237 million units from 1.238 million units reported earlier. Year over year, housing starts rose 3.9% in August.
Building permits in August came in at 1.475 million units, higher than the consensus estimate of 1.410 million units. The metric for July was revised upward to 1.406 million units from 1.396 million units reported earlier. Year over year, building permits decline 6.5% in August.
For the week ended Sept. 13, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.6 million barrels from the previous week.
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U.S. stock markets closed lower on Wednesday after the Fed cut the benchmark lending rate by 50-basis point. Market participants were initially very enthusiastic lifting major indexes to record highs. However, investors booked profit on concerns that the big rate cut was predominantly to avoid an imminent recession. All three major stock indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) was down 0.25% or 103.08 points to close at 41,503.10, after a choppy session. In intraday trading, the blue-chip index touched an all-time high of 41,981.97. Notably, 18 components of the 30-stock index ended in negative territory while 12 in positive zone.
The tech-heavy Nasdaq Composite finished at 17,573.30, sliding 0.3% due to weak performance by technology giants. In intraday trading, the tech-laden index was up by nearly 265 points. The major loser of this index was Intel Corp. (INTC - Free Report) . The stock price of this desktop chipset giant was down 3.3%. Intel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 was down 0.3% to finish at 5,618.26. Wall Street’s benchmark is currently less than 1% below its all-time high recorded in July. In intraday trading, the broad-market index touched an all-time high of 5,689.75.
10 out of 11 broad sectors of the broad-market index ended in negative territory while one in positive zone. The Technology Select Sector SPDR (XLK) and the Utilities Select Sector SPDR (XLU) fell 0.9% and 0.8%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 5.8% to 17.18. A total of 11.63 billion shares were traded on Wednesday, higher than the last 20-session average of 10.82 billion. Decliners outnumbered advancers on the NYSE by a 1.14-to-1 ratio. On Nasdaq, a 1.36-to-1 ratio favored declining issues.
Fed Initiates a 50-Basis Point Interest Rate Cut
On Sept. 18, in its FOMC meeting, the Fed reduced the benchmark lending rate by 50 basis-points, marking the first cut of the Fed Fund rate since March 2020, at the onset of the COVID-19 pandemic. Although the first rate cut was certain in September, market participants are surprised about its magnitude. The current Fed Fund rate is in the range of 4.75-5%.
Just before the Fed’s decision, the CME FedWatch tool showed a 100% probability of a 25 basis-point cut and a 65% chance of a 50 basis-point reduction. Fed’s aggressive beginning of the low-interest rate regime has compelled a section to market researchers to raise eyebrows about the health of the U.S. economy.
In his post-FOMC meeting statement, Fed Chairman Jerome Powell said, “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.”
More important, the Fed’s latest “dot-plot” shows a strong possibility of another rate cut of 50-basis point by the end of 2024. The Fed has two more FOMC meeting left this year, scheduled in November and December.
Economic Data
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported that housing starts in August came in at 1.356 million units, higher than the consensus estimate of 1.318 million units. The metric for July was marginally revised downward to 1.237 million units from 1.238 million units reported earlier. Year over year, housing starts rose 3.9% in August.
Building permits in August came in at 1.475 million units, higher than the consensus estimate of 1.410 million units. The metric for July was revised upward to 1.406 million units from 1.396 million units reported earlier. Year over year, building permits decline 6.5% in August.
For the week ended Sept. 13, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.6 million barrels from the previous week.