Stocks closed lower Wednesday as the Federal Reserve lowered interest rates by 50 basis points, raised some concerns over the health of the U.S. economy. The Dow Jones Industrial Average lost over 100 points after being up as much as 375.79 points ahead of the Fed's decision, while the S&P 500 Index and Nasdaq Composite declined by about 0.3% each.
Here's how the market settled on Wednesday:
S&P 500 Index
Dow Jones Industrial Average
Nasdaq Composite Index
FedWatch:
The Federal Open Market Committee lowered its benchmark interest rate to a range of 4.75% to 5.00% from 5.25% to 5.5%, issuing the first rate cut in four years as inflationary pressures demonstrate positive progress across the economy.
"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.
The decision was not unanimous, as Fed Governor Michelle Bowman voted for a quarter-point cut instead. Excluding rate cuts during the coronavirus pandemic, the last time the Fed reduced rates by half a point was in 2008 in response to the global financial crisis.
Fed Chair Jerome Powell said during his post-meeting press conference that he does not see "elevated" risk of an economic downturn following the large rate cut.
"We waited. And I think that patience has really paid dividends in the form of our confidence that inflation is moving sustainably under 2%, so I think that is what enables us to take this strong move today," Powell said. "I do not think that anyone should look at this [decision] and say, 'Oh, this is the new pace.'"
"We're trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with this inflation," Powell said. "That's what we're trying to do, and I think you could take today's action as a sign of our strong commitment to achieve that goal."
In Economic News
Housing Starts and Building Permits rose at a faster-than-expected rate in August, the Census Bureau reported Wednesday, providing more positive signals for the housing market as the SPDR S&P Homebuilders ETF
Construction starts of privately owned U.S. home increased by 9.6% from July's downwardly adjusted print, totaling a seasonally adjusted 1.356 million. On the permit side, August saw an increase of 4.9% to from July's upwardly revised number, totaling 1.475 million.
For Thursday:
Market participants will continue to digest the central bank's large rate-cut, alongside existing home sales data for August.
