Jamie Spencer
U.S. stocks continued their post-election surge Thursday, buoyed by the Federal Reserve’s decision to cut interest rates. All three major indexes touched record highs during the session, building on momentum seen earlier in the week.
The Fed trimmed its short-term benchmark rate by a quarter percentage point, bringing it down to a range of 4.5% to 4.75%, marking the second consecutive cut following a half-point reduction in September. This move brings rates off their 23-year high of 5.25% to 5.5%.
The Dow Jones Industrial Average finished flat at 43,729.34, while the S&P 500 climbed 0.74% to a record 5,973.10. The Nasdaq Composite led the day’s gains, rising 1.51% to close at a record 19,269.46.
Treasury Yield Response and Fed’s Economic Outlook
The 10-year Treasury yield spiked on Wednesday, with analysts attributing the increase to potential fiscal concerns under President-elect Donald Trump, whose policies may include hefty tariffs and tax cuts that could stoke inflation. However, the yield retreated after the Fed’s announcement, dropping 0.091% on Thursday to 4.335%.
Fed Chairman Jerome Powell expressed cautious optimism about the economy. “They (the Fed) acknowledge that policy remains restrictive and that further cuts are likely but that the pace of those cuts may slow,” wrote James Knightley, chief international economist at ING.
Economic and Market Implications
Trump’s economic policies, such as proposed tariffs and tax reductions, have sparked debate among economists about the potential for a resurgence in inflation. This has left experts divided on whether the Fed will pause rate cuts at its December meeting or push through another reduction.
Knightley noted that while the Fed was hesitant to discuss the potential impacts of Trump’s policies directly, there is a risk of “slightly firmer growth with more inflationary pressures,” which could alter the Fed’s approach to rate cuts.
Post-Market Earnings Highlights
The market also digested key corporate earnings after Thursday’s close:
- Pinterest exceeded third-quarter revenue and earnings expectations but issued a weaker-than-anticipated outlook for the fourth quarter.
- Rivian missed on its third-quarter estimates and revised down its full-year earnings outlook.
- Airbnb narrowly surpassed third-quarter revenue forecasts but fell short on earnings.
Investors now turn their focus to upcoming data releases and company earnings, while keeping a close eye on potential policy shifts under the new administration.
