S&P 500, Nasdaq end higher and Dow flat after Fed cuts interest rates again

On By Littum

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US stocks mostly extended their big post-election rally on Thursday, with all three major indexes hitting session highs after the Federal Reserve trimmed interest rates.

The Fed cut its short-term benchmark fed funds rate by a quarter of a percentage point to between 4.5% to 4.75%, down from a 23-year high of 5.25% to 5.5% just a few months ago. It was the second cut in a row and off the heels of half a point the last time the Fed met in September.

The blue-chip Dow closed flat at 43,729.34, but the broad Standard & Poor’s 500 ended at a record 5,973.10, up 0.74%. The technology-laden Nasdaq ended with an increase of 1.51% to a record high of 19,269.46.

The 10-year Treasury yield rose on Wednesday, a bump that some economists attributed to concerns that President-elect Donald Trump would run up the deficit and implement sweeping tariffs that would reignite inflation. But it fell after the Fed’s interest rate announcement. The rate had last fallen 0.091% on Thursday to 4.335%.

What is the Fed’s outlook for interest rates?

Fed Chairman Jerome Powell said the Fed felt “good” about the economy and suggested more small rate cuts ahead, but the pace remains data-dependent.

“They (the Fed) acknowledge that policy remains restrictive and that further cuts are likely, but that the pace of those cuts may slow,” wrote James Knightley, chief international economist at Dutch bank ING. “They were reluctant to discuss the ‘Trump effect,’ but here’s the risk: slightly firmer growth with more inflationary pressure. And that might lead to a less aggressive rate-cutting narrative.”

Trump has promised sweeping tariffs and tax cuts that some economists say could reignite inflation.

Economists are divided so far on whether the Fed will pause interest rate cuts at its next and final meeting in December or squeeze in another quarter-point cut before a possible pause.

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Earnings reports by market

In between the big news this week, which included the election on Tuesday and Thursday’s Fed meeting, companies continued to report earnings.

Some highlights after the market close include:

  • Pinterest: Topped third-quarter revenue and earnings estimates, but gave a weak fourth-quarter revenue outlook.
  • Rivian: Missed third-quarter estimates and lowered full-year earnings expectations.
  • Airbnb: Just above third-quarter sales estimates, but missed its earnings.

Medora Lee is the money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.