A television broadcasts the Federal Reserve's interest rate cut on the floor of the New York Stock Exchange on Sept. 18, 2024.
Michael Nagle | Bloomberg | Getty Images
Stocks closed lower Wednesday in a volatile session as the Federal Reserve lowered interest rates in a half-percentage-point move. The outsized rate cut was cheered initially by traders, though it did raise concerns the Fed was trying to get ahead of potential economic weakness.
The Dow Jones Industrial Average slid 103.08 points, or 0.25%, to end the day at 41,503.10. It was up as much as 375.79 points just after the Fed decision.
The S&P 500 lost 0.29% and closed at 5,618.26. The Nasdaq Composite dropped 0.31% to 17,573.30. The S&P 500 and the Dow both touched records initially before falling back.
Dow, intraday
The Fed lowered its overnight lending rate to a range of 4.75% to 5.00% from 5.25% to 5.5%, the first rate cut in four years as inflation levels ease from the levels seen two years ago.
"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 central bank said in a statement.
Traders in the week leading up to the decision increasingly hoped the central bank would cut by a half point rather than its traditional quarter-point move. They got what they hoped for, but stocks failed to hold their gains.
"The decision to cut by the more aggressive 0.50% increment suggests the Fed has gotten comfortable that the downward trends in inflation are sustainable and may now be shifting their focus to avoid causing economic stress by keeping rates too high for too long," said Morningstar Wealth Chief Investment Officer Philip Straehl.
Federal Reserve Chair Jerome Powell tried to assuage concerns at a postmeeting press conference that the central bank was cutting aggressively because the Fed sees something troubling about the economy. He hinted it was because the upside risks to inflation have come down so much.
"I don't see anything in the economy right now that suggests that the likelihood … of a downturn is elevated," said Powell.
Stocks rolled over nonetheless despite Powell's comments. Part of the decline may be due to the sizable rally leading into Wednesday's much-anticipated cut. The S&P 500 is up nearly 18% on the year and more than 1% in the past one month.
