Stocks close in the red
U.S. stocks ended Wednesday’s session in the red.
The Dow Jones Industrial Average lost 103.08 points, or 0.25%, to finish at 41,503.1.
The S&P 500 shed 0.29% to close at 5,618.26. The Nasdaq Composite dropped 0.31% to conclude at 17,573.3.
— Hakyung Kim
Bank stocks pop after big Fed rate cut
Bank stocks hit their session highs after the Fed lowered rates by a half percentage point.
The SPDR S&P Bank ETF (KBE) rose 2.4%, led by ServisFirst Bancshares and Glacier Bancorp, which gained more than 4% each. The SPDR S&P Regional Banking ETF (KRE) popped 3.3%, on pace for its best day since Aug. 23.
— Fred Imbert
Homebuilders ETF jumps to fresh high on expectation of lower mortgage rates after Fed cut
The SPDR S&P Homebuilders ETF (XHB) jumped to a fresh record high on Wednesday, after the Federal Reserve’s interest rate cut spurred hopes that mortgage rates will decline further.
The SPDR S&P Homebuilders ETF.
The central bank cut benchmark interest rates by 50 basis points on Wednesday. Recent days saw trader expectations for the size of the Fed’s first cut in four years whipsaw between 25 basis points and 50 basis points.
— Brian Evans
Bitcoin holds steady at $60,000 after Fed decision
Budrul Chukrut | Lightrocket | Getty Images
Bitcoin was little changed Wednesday afternoon as investors tried to make sense of the Fed’s decision to enact a 50 basis point interest rate cut.
The flagship cryptocurrency was trading flat at $60,205.76, according to Coin Metrics. On Tuesday, it jumped 5% in anticipation of the Fed decision.
Coinbase rose about 1%, while MicroStrategy, a high beta play on the price of bitcoin, added 2.5%.
Risk assets including bitcoin could wobble in the short term with investors worried about a looming recession. Historically, however, easing monetary conditions have positive implications for bitcoin in the medium term.
“The FOMC cut rates by 50 basis points even though, as it said in the statement, inflation ‘remains somewhat elevated,'” said Zach Pandl, Grayscale Investments’ head of research. “Central banks’ willingness to take risks with inflation tends to drive investors to store-of-value assets, like gold and bitcoin. Markets were choppy immediately after the decision … over time bitcoin will benefit from lower rates and a weaker dollar.”
— Tanaya Macheel
Fed slashes rates by a half percentage point
The Fed delivered a super-sized rate cut on Wednesday, lowering the overnight rate by 50 basis points, or a half-percentage point.
“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the postmeeting statement said.
— Fred Imbert
BMO’s Belski says rate cuts are good news for growth stocks, particularly in tech sector
Interest rate cuts will likely benefit growth stocks, according to BMO Capital Markets chief investment strategist Brian Belski.
“In this context, we believe equity gains will broaden, with continued potential for growth stocks, particularly in the technology sector, to rise further,” Belski said in a Wednesday note. “In addition, while Fed rate cuts in non-recessionary periods have historically been favorable for equities overall, they also make growth stocks more attractive, as lower rates increase the present value of these companies’ future cash flows.”
Belski added that the artificial intelligence growth story “shows no signs of ending for now,” and that he expects global tech to deliver earnings growth of between roughly 15% and 20%. He expects the U.S. economy to secure a soft landing, and for the earnings per share of S&P 500 companies to grow 11% this year and 8% in 2025.
— Pia Singh
Stocks making the biggest moves midday
A tugboat pushes a barge near the U.S. Steel Corp. Clairton Coke Works facility in Clairton, Pennsylvania, on Sept. 9, 2024.
Justin Merriman | Bloomberg | Getty Images
Defensive stocks could outperform after the rate cut, per LPL Financial
Prior Federal Reserve interest rate cuts show that defensive sectors of the market typically outperform in the six months following a rate reduction, according to LPL Financial.
When looking at the rate cut period and subsequent months in 1995, health care advanced 14.8%, making it the market’s top performer, per the firm. Consumer staples and utilities also outperformed with gains of 4.9% and 2.4%, respectively.
Meanwhile, technology underperformed the broader market.
“The takeaway here is that the technology sector, which as we know, is in a major buildout phase now with artificial intelligence, may not get a performance bump from a more accommodating Fed,” chief economist Jeffrey Roach and chief fixed income strategist Lawrence Gillum said.
— Hakyung Kim
Markets also eyeing Bank of Japan meeting, says investor
Japan’s national flag flutters at the Bank of Japan headquarters in Tokyo on May 30, 2024.
Kazuhiro Nogi | Afp | Getty Images
As the dollar weakened against the yen in the lead-up to the Federal Reserve rate cut announcement Wednesday afternoon, further dollar-yen volatility could be on hand this week when the Bank of Japan starts its two-day policy meeting Thursday.
“A cut today, especially if 50 basis points, will shift the focus to the Bank of Japan meeting later in the week for any language from the BOJ regarding further tightening of policy and implications on the Yen and as a result further unwinding of the Yen carry trade,” said Stephen Kolano, chief investment officer of Integrated Partners.
The yen has appreciated nearly 12% against the dollar quarter to date as the Bank of Japan commenced the first rate hike in decades.
— Hakyung Kim
History says a quarter-point rate cut will bode better for the market, says Barclays
As traders speculate over whether the Federal Reserve will reduce interest rates by a quarter-point percentage or half-point percentage, Barclays head of European equity strategy Emmanuel Cau says a lower rate cut may mean better news for stocks.
“History suggests equities perform better after initial cuts of 25bp than 50bp,” Cau said in a research note on Wednesday.
However, the economic data following the rate cut may matter more than the rate cuts themselves, Cau added. In a no-recession scenario, markets typically remain muted before rising by mid-teen percentages in the following 12 months, per the strategist.
Meanwhile, in the case of a recession, stocks usually decline after the first rate cut.
“It can take two to three quarters for economic growth to rebound after the first cut, so we won’t know for sure whether a recession is avoided or not for some time. We find that a reliable and timely indicator of a recession is jobless claims, which so far remain well behaved,” said Cau.
— Hakyung Kim
Homebuilders hit record high ahead of Fed decision
The SPDR S&P Homebuilders ETF (XHB) hit a record high on Wednesday as traders awaited a key Federal Reserve policy announcement. The fund traded as high as $122.44 before pulling back from those levels.
Year to date, XHB has rallied nearly 27%.
XHB year to date
— Fred Imbert
Dollar weakens against yen
Japanese yen and U.S. dollar on display in Yichang, Hubei province.
Costfoto | Nurphoto | Getty Images
The dollar depreciated against the yen ahead of the Federal Reserve’s interest rate cut announcement.
The yen rose around 0.4% against the greenback to 141.88. Month to date, the yen has appreciated nearly 3% against the dollar.
The Bank of Japan is also beginning its policy meeting later in the week. The central bank is largely expected to hike rates again by the end of the year as the Fed begins to ease its monetary policy.
— Hakyung Kim
Oil market has likely priced in Fed rate cut: ‘We are not expecting fireworks’
An aerial view of oil storage containers near the LyondellBasell Houston refinery in Houston on June 14, 2024.
Brandon Bell | Getty Images
Oil prices are down nearly 1% with an expected interest rate cut by the Federal Reserve unlikely to provide much in the way of support.
“In theory a rate cut is supportive for oil prices but we’ve seen prices rallying in recent days, likely pricing this in already, hence the response may be muted,” said Matt Smith, lead oil analyst for the Americas at Kpler.
Though a quarter-point cut is likely already priced into the oil market, prices could rise a bit if the Fed makes a bigger move today, said Andy Lipow, president of Lipow Oil Associates.
“A 50 basis point cut is slightly supportive of the oil market since it translates into a weaker dollar and stronger prices for dollar denominated commodities,” Lipow said.
The oil market has been more focused on a looming supply and demand imbalance. Consumption is softening in China as OPEC+ plans to increase production in December.
“We are not expecting fireworks in the sky following Fed rate cuts,” said Manish Raj, managing director of Velandera Energy Partners.
“The Fed action is unlikely to suddenly spur demand, which has otherwise been soft,” Raj said. “Nobody is hitting the gas stations just because the Fed decides to cut the rates today.”
— Spencer Kimball
Risk is skewed to the downside heading into Fed meeting, according to BTIG
BTIG isn’t feeling too optimistic about equities heading into the Federal Reserve meeting this afternoon.
“There are some viewpoints that it doesn’t matter if they go 25 or 50, as long as the dot plot shows 100bps by year-end,” BTIG analyst Jonathan Krinsky said in a Tuesday note. “We tend to agree with that, but also think the setup for a ‘false breakout’ remains high regardless of [today’s] meeting. It’s also highly unusual to be this close to a meeting with this much uncertainty.”
Krinsky noted that the S&P 500 hit a marginal new all-time high on Tuesday before pulling back. “Whether we make another run at the highs or not, we feel the risk-reward in the near-term is now skewed to the downside,” he said.
One sector that will face significant downside risk, according to the analyst, is consumer staples.
— Pia Singh
Stocks open little changed Wednesday
Traders work on the floor of the New York Stock Exchange on Sept. 18, 2024.
Stephanie Keith | Getty Images
The S&P 500 started Wednesday’s trading session flat.
The broad market index ticked up just 0.01%. The Nasdaq Composite rose 0.2%, while the Dow Jones Industrial Average slipped 50 points, or 0.2%.
— Hakyung Kim
Clarida expects the Fed to cut by a quarter point
Former Federal Reserve Vice Chair Richard Clarida expects the central bank Wednesday to lower interest rates by a quarter percentage point, less than market expectations.
In a CNBC interview, Clarida, who is now a managing director and global economic advisor at bond giant Pimco, said the debate will be less about the recent weakness in the labor market and easing inflation and more about where things are headed further in the future.
“We’re sticking with our call for 25” basis points, he said during a “Squawk Box” interview. “The Fed needs to be setting rates today based on where it thinks inflation and the labor market is going to be in six to 12 months, and so I’m not really all that sympathetic to behind the curve, July versus September.”
— Jeff Cox
Housing starts, permits stronger than expected in August
New homes under construction in California.
George Rose | Getty Images
Housing starts and building permits increased at a faster -than-expected pace in August, the Census Bureau reported Wednesday.
Privately owned starts totaled a seasonally adjusted 1.356 million for the month, a 9.6% increase from the downwardly adjusted July total and better than the 1.31 million Dow Jones estimate.
On permits, the total of 1.475 million showed an increase of 4.9% from the upwardly revised July figure and topped the forecast for 1.41 million.
— Jeff Cox
Stocks making the biggest moves premarket
Check out some of the companies making headlines in premarket trading:
- United States Steel — Shares advanced more than 3% after Reuters reported the Committee on Foreign Investment in the U.S. granted a request to push back a review of Nippon Steel’s bid for U.S. Steel until after the November election. Reuters cited a person familiar with the matter.
- General Mills — Shares were 1% lower after profit for the packaged foods company dropped 14% last quarter on lighter margins due to higher input costs.
- Casella Waste Systems — Stock in the recycling company pulled back more than 4% after it announced plans for a $400 million equity offering of its Class A common stock.
Read the full story here.
— Brian Evans
Options market implies a move of over 1% Wednesday, Goldman says
The options market shows that traders expect a sizable move for the stock market on Wednesday, according to Goldman Sachs.
John Marshall of the firm’s derivatives research team said in a note to clients that market pricing suggests traders expect a move in equities that is roughly in line with recent Federal Open Market Committee decision days but still higher than a typical trading session.
“Options imply a +/-1.1% move in S&P 500 for the 18-Sept FOMC meeting; this compares to an average of +/-1.2% move priced into SPX ahead of FOMC meetings since the beginning of 2022. Arguably, this is an unusually important FOMC meeting due to the expected start of a cutting cycle,” the note said.
— Jesse Pound
How the stock market has done on Fed decision days
Traders react as Federal Reserve Chair Jerome Powell is seen delivering remarks on a screen, on the floor of the New York Stock Exchange on May 3, 2023.
Brendan McDermid | Reuters
Traders expect the Fed to lower rates and end the rate hiking cycle that began in March 2022. Take a look at how the S&P 500 has fared on Fed decision days since then.
How the S&P 500 performs on Fed decision days since 2022
| Date | SPX Fed Day % chg |
|---|---|
| 03/16/2022 | 2.24 |
| 05/04/2022 | 2.99 |
| 06/15/2022 | 1.46 |
| 07/27/2022 | 2.62 |
| 09/21/2022 | -1.71 |
| 11/02/2022 | -2.50 |
| 12/14/2022 | -0.61 |
| 02/01/2023 | 1.05 |
| 03/22/2023 | -1.65 |
| 05/03/2023 | -0.70 |
| 06/14/2023 | 0.08 |
| 07/26/2023 | -0.02 |
| 09/20/2023 | -0.94 |
| 11/01/2023 | 1.05 |
| 12/13/2023 | 1.37 |
| 01/31/2024 | -1.61 |
| 03/20/2024 | 0.89 |
| 05/01/2024 | -0.34 |
| 06/12/2024 | 0.85 |
| 07/31/2024 | 1.58 |
— Fred Imbert
European markets open lower
European markets opened lower on Wednesday as investors digested key data from the region and looked ahead to the U.S. Federal Reserve’s monetary policy decision.
The pan-European Stoxx 600 was down 0.08% in early deals, with sectors and major bourses diverging. Mining stocks shed 0.69%, while insurance added 0.46%.
— Karen Gilchrist
BlackRock, Microsoft combine forces to raise $100 billion to invest in AI
The BlackRock logo is displayed on the exterior of a BlackRock office in San Francisco on July 15, 2024.
Justin Sullivan | Getty Images
BlackRock and Microsoft shares moved slightly higher in overnight trading after announcing their participation in a group to raise up to $100 billion to develop data centers and power infrastructure for artificial intelligence.
The companies will be part of a group known as Global AI Infrastructure Investment Partnership, which will target pulling together $30 billion of initial capital.
— Samantha Subin, Jordan Novet