S&P 500, Gold Strike All-Time Highs, Small Caps Rally After Fed Slashes Interest Rates For First Time In 4 Years (UPDATED)

Author: Adam Eckert | September 18, 2024 02:55pm

Editor’s note: This story has been updated with additional information.

Markets are bouncing Wednesday afternoon following the Federal Reserve’s decision to cut rates by 0.5%, marking the beginning of the central bank’s highly anticipated cutting cycle.

What To Know: Wednesday’s 0.5% rate cut brings the target fed funds rate to a new range between 4.75% and 5%, down from a 23-year high of 5.25% to 5.5%. It’s also the first rate cut since March 2020.

The fed funds rate has been sitting at a range between 5.25% and 5.5% since the central bank last hiked in July 2023.

The SPDR S&P 500 (NYSE:SPY), which tracks the S&P 500 index, was up 0.44% at all-time highs at last check, led higher by a variety of names like Arm Holdings Plc (NASDAQ:ARM), The Trade Desk Inc (NASDAQ:TTD) Toyota Motor Corp (NYSE:TM), General Motors Co (NYSE:GM) and Marriott International (NASDAQ:MAR).

The materials sector, as tracked by the Materials Select Sector SPDR Fund (NYSE:XLB), was showing the most strength at the time of writing, climbing approximately 0.6% following the Fed decision. The energy sector, tracked by the Energy Select Sector SPDR Fund (NYSE:XLE), was the weakest, down 0.3% following the rate cut. Energy stocks had performed well on Wednesday ahead of the Fed decision, which may explain some of the relative weakness in afternoon trading.

Here’s a look at how various ETFs tracking the price-weighted Dow Jones Industrial Average, tech stocks, small caps, treasuries and gold are faring following the Fed’s latest move.

SPDR Dow Jones Industrial Average ETF (NYSE:DIA): up 0.38% at $418.87.

Invesco QQQ Trust (NASDAQ:QQQ): up 0.59% at $476.25.

IShares Russell 2000 ETF (NYSE:IWM): up 2.31% at $224.36. Small caps outperformed broader markets ahead of the rate cut and continued to outperform in afternoon trading.

IShares 20+ Year Treasury Bond ETF (NASDAQ:TLT): down 0.36% at $100.48.

SPDR Gold Trust (NYSE:GLD): up 0.66% at $239.02. Gold hit all-time highs following the Fed’s rate decision.

It’s also worth noting that crypto markets are volatile following the Fed decision on rates. Bitcoin (CRYPTO: BTC) was down 0.86% over a 24-hour period, trading at $60,480, but well off its lows for the day, and Ethereum (CRYPTO: ETH) was down 1.79% at $2,322.

Check This Out: Federal Reserve Delivers Bold 0.5% Rate Cut, Signals Further Easing Ahead

The increased volatility is likely a result of uncertainty heading into the meeting. According to CME’s FedWatch tool, the market was projecting a 61% chance of a larger 0.5% rate cut heading into the meeting versus a 39% chance of a smaller 0.25% cut.

As reported by Benzinga, the updated quarterly Dot Plot, which helps signal the Fed’s future policy intentions, indicates a more aggressive path for rate cuts than previously projected following Wednesday’s 0.5% cut. The median projection now calls for a total of 1% in rate cuts in 2024.

SPY Price Action: At the time of publication, the SPDR S&P 500 was up 0.44%, trading at $565.62, according to Benzinga Pro.

Read Next: