All three main U.S. stock market indexes spiked after the Federal Open Market Committee announced a 25 basis point cut to the target range for the federal funds rate, but quickly fell back into their intraday ranges and closed mixed.
Factors other than monetary policy figured into a relatively stable trading session, as the world’s most important stock suffered another trade war blow.
As was nearly 100% certain heading into the announcement, the FOMC cut interest rates by a quarter point to a range of 4.00% to 4.25%. Its Summary of Economic Projections – or “dot plot” – reflects a similar move at the next Fed meeting in October and another 25-basis-point cut in December.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
“Recent indicators suggest that growth of economic activity moderated in the first half of the year,” the Fed said in its policy statement. “Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.”
During his press conference, Fed Chair Jerome Powell cited slowing economic activity for the decision. “The moderation in growth largely reflects a slowdown in consumer spending,” as well as a weakened housing sector, Powell said.
The Fed chair also noted that business investment has accelerated compared to a year ago. You can track news and developments around the FOMC meeting on our live Fed blog.
Nvidia (NVDA, -2.6%) and Amazon.com (AMZN, -1.0%) were the two worst-performing Dow Jones stocks after the Fed announcement, even as the index surged as much as 463 points and hit a new all-time high on an intraday basis.
Financials and consumer staples stocks led the way higher, while the S&P 500 and the Nasdaq Composite suffered for their greater exposure to consumer discretionary and tech stocks, two of three official S&P Global sectors with negative closing numbers for the day.
Small-cap stocks – seen to benefit most as a group from lower interest rates – continued to rally into and through the FOMC decision, with the Russell 2000 Index up as much as 2.1% intraday, closing modestly higher and extending to nearly 37% the bounce off its April 9 post-Liberation Day low.
The yield on the 2-year U.S. Treasury note inched up to 3.549% from 3.510% as of Tuesday. The yield on the 30-year U.S. Treasury bond edged higher to 4.669% from 4.646%.
At the closing bell on Fed Day, the tech-heavy Nasdaq Composite was down 0.3% at 22,261, and the broad-based S&P 500 had shed 0.1% to 6,600. But the blue-chip Dow Jones Industrial Average was holding a 0.6% gain at 46,018 after hitting a fresh new all-time high on an intraday basis.
Is Nvidia a trade war pawn?
Nvidia (NVDA) dragged on all three main equity indexes after the Financial Times reported the Cyberspace Administration of China has banned tech companies such as ByteDance and Alibaba from buying a product the leader of the AI revolution made specifically for the Middle Kingdom.
China’s internet regulator told companies to end testing of and orders for Nvidia’s RTX Pro 6000D. As Louis Navellier of Navellier & Associates notes, observers expect President Xi Jinping to use Nvidia as leverage to negotiate a better trade deal with the U.S. during a scheduled phone call with U.S. President Donald Trump this Friday.
“It will be interesting to see exactly what President Trump announces on Friday after his call with President Xi,” Navellier adds, “other than the anticipated TikTok deal.”
According to The Wall Street Journal, a deal being negotiated by the Trump administration and Beijing would see Oracle (ORCL), private equity firm Silver Lake Technology Management and venture capital outfit Andreessen Horowitz combine in a consortium with an 80% stake in the social media platform.
Housing starts and building permits sag
The Census Bureau said housing starts were down 8.5% month over month in August, reversing course after solid gains in July and June. Building permits, considered a better indicator of broad housing demand, were down 3.7%, extending a downtrend undergirded by high mortgage rates.
“The slowing housing starts and permits is one of the strongest arguments for additional rate cuts,” writes Comerica Wealth Management Chief Investment Officer Eric Teal.
Teal says a “2% decline in mortgage rates is needed to jump-start the housing market given the lock-in effects and recency bias.”
StubHub punches its IPO ticket
STUB priced its offering of approximately 34 million shares in the middle of its announced target range of $22 to $25, at $23.50 per share, to raise about $800 million.
One of the biggest IPOs of the year so far, STUB opened at $25.35 in its market debut, hit an intraday high of $26.34, and closed at $22.00. So, should you buy the dip in STUB stock?
