Stocks end mixed, trade choppy after rate cuts

The Nasdaq and the S&P 500 closed lower in choppy trading on Wednesday, after the U.S. Federal Reserve cut interest rates by an expected 25 basis points and Fed Chair Jerome Powell cited the weak job market.

The Dow closed higher after meandering during Powell’s speech. The TSX ended slightly higher after dipping in and out of the red in afternoon trading, as traders also absorbed news of an expected 25 basis point rate cut in Canada.

The U.S. central bank indicated it will steadily cut rates for the rest of the year as policymakers signaled concerns about weakness in the labour market. The Fed projected two more quarter-percentage-point cuts this year. In a press conference, Powell talked about the mounting downside risks of employment compared to inflation, but said inflation risks still must be assessed and managed. The rate cut was already priced in by investors.

“Powell tempered some of the initial enthusiasm in the markets for a more aggressive path of monetary easing. He noted the softness in the labour market, but reserves a larger cut for more serious conditions that are not present today,” said Michael Rosen, chief investment officer at Angeles Investments.

“The Fed also raised its inflation forecast, highlighting the delicate balance between setting monetary policy to offset a weaker labour market versus bringing inflation lower,” he said.

The Fed’s decision and outlook will test Wall Street’s recent rally, which has been supported by rate-cut expectations and revived enthusiasm around AI-stock-linked trading.

The Dow Jones Industrial Average rose 260.42 points, or 0.57%, to 46,018.32, the S&P 500 lost 6.41 points, or 0.10%, to 6,600.35 and the Nasdaq Composite lost 72.63 points, or 0.32%, to 22,261.33.

The S&P/TSX composite index ended up 6.43 points, or 0.02%, at 29,321.66, after notching a record intraday high of 29,465.14.

Investors see a roughly 75% chance the Canadian central bank eases further by December.

The TSX consumer discretionary sector rose 0.39% as shares of Dollarama and Magna International Inc notched gains. Heavily weighted financials added 0.14%, but six of the 10 major sectors ended lower.

Technology declined 0.93%, with electronic equipment company Celestica Inc losing 2.60%.

Energy ended 0.37% lower as the price of oil settled down 0.7% at US$64.05 a barrel.

After the Fed cut, U.S. Treasury yields initially erased gains and turned lower on the session before reversing course as Powell spoke. The benchmark U.S. 10-year note yield rose 4.6 basis points to 4.072%.

“I would say this is a mildly bullish report, as it shows that the Fed no longer has the hawkish bias it had earlier in the year. In the commentary, unemployment seems as much of a worry now as inflation,” said Chris Grisanti, chief market strategist at MAI Capital Management in New York.

“The Fed lowered rates by 25 basis points – no surprise there – but the bigger news here is the huge dispersion in the ‘dot plot’ estimates as to where rates will be a year and two years from now,” Grisanti added. Powell said in his press briefing that some of the more dire inflationary scenarios facing the economy have faded, adding that tariffs may be pushing up prices but it increasingly looks like it will be “a one-time price increase.”

The U.S. dollar strengthened against major peers after the Fed’s announcement and as Powell spoke to the press. The dollar index rose 0.35% to 96.96.

Gold prices hit a fresh record high after the Fed’s decision. Spot gold was down 0.82% by late day to US$3,659.10 an ounce after reaching a new peak of $3,707.40.

In U.S. equities, financial stocks like American Express helped boost the Dow. Nvidia weighed on the Nasdaq. Shares fell 2.6% after a report said China’s internet regulator had instructed the country’s biggest tech companies to stop buying all of the AI leader’s chips.

Workday jumped 7.2% after a report that activist investor Elliott Management took a more than US$2 billion stake in the human resources software provider.

Lyft popped 13.1% on the news that Alphabet’s Waymo would launch autonomous cab rides in Nashville next year in collaboration with the ride-hailing firm. Shares in rival Uber fell 5%.

Declining issues outnumbered advancers by a 1.02-to-1 ratio on the NYSE and by a 1.1-to-1 ratio on the Nasdaq. The S&P 500 posted 18 new 52-week highs and five new lows while the Nasdaq Composite recorded 122 new highs and 45 new lows. Volume on U.S. exchanges was 18.91 billion shares, compared with the 16.47 billion average for the full session over the last 20 trading days.

Reuters, Globe staff