Wall Street soars to record highs
US stock indices had a mixed close on Thursday, with modest losses for the S&P and NASDAQ, and gains for the Dow and Russell 2000. Equities sold off initially after the Fed’s FOMC announced its expected 25 basis point rate cut. There was only one dissenter, and that was President Trump’s new pick for Fed governor, Stephen Miran, who voted for a 50-basis-point cut.
Source: TN Trader
Investors paid close attention to the concurrent release of the FOMC’s quarterly Summary of Economic Projections. This showed that the majority of the 19 members of the FOMC favoured two more 25 basis point rate cuts before the year-end. But then went on to forecast one cut in 2026 and a final one in 2027, taking the Fed Funds down to 3.00-3.25%.
This outlook fell short of market hopes for a deeper easing cycle. But equities then bounced off their lows as investors interpreted these forecasts as a vote of confidence in the US economy.
The FOMC raised its predictions for GDP growth and kept its inflation estimates unchanged from June. However, as Fed Chair Jerome Powell stated in his subsequent press conference, labour market risks have increased, which helped to justify yesterday’s cut, even if the effects of President Trump’s tariffs remain unclear. Mr Powell described the move as “a risk management cut,” a new phrase that differed from previous meetings.
Despite last night’s muted close, US stock index futures soared in early trade this morning. The move has taken the Dow, S&P 500 and NASDAQ to fresh all-time highs. And in contrast to last year’s rate cuts, the 10-year Treasury yield hasn’t, counterintuitively, surged higher. Instead, it appears to be well-anchored just above 4.0%, near the lows from last April.