Federal Reserve Chairman Jerome Powell recently addressed a news conference following the September meeting of the Federal Open Market Committee. The Federal Reserve implemented a significant 50-basis-point cut, reducing the federal funds rate to 4.75%-5%. The Committee forecasts another half-point cut by year-end, targeting a rate of 4.25%-4.5%, and revised its unemployment rate projection up to 4.4% from June’s 4%.
Despite the rate cut, U.S. markets couldn’t sustain their initial gains, with the S&P, Dow, and Nasdaq all closing down. Conversely, Asia-Pacific markets, particularly Hong Kong’s Hang Seng, traded higher following the city’s interest rate reduction.
A CNBC survey revealed Vice President Kamala Harris is perceived by 48% of respondents as more likely to win the presidential election than former President Donald Trump, who garnered 41%. Bridgewater Associates Founder Ray Dalio emphasized the election’s significance, yet critiqued both candidates as inadequate for the country’s needs. He also noted the economy’s relative equilibrium, highlighting the Fed’s crucial “balancing act.”
Stock performance post-rate cut suggests investors may shift towards riskier assets due to lower Treasury yields. As such, CNBC Pro identified 10 stocks poised to benefit most from the cut.
Intriguingly, the futures market accurately predicted the 50-basis-point cut, in contrast to the prevailing expert opinion of a 25-point cut. While initial market reactions to the Fed’s cut were positive, they later dipped, reflecting the inherent volatility and sentiment-driven nature of markets.
Powell acknowledged potential concerns of a recession but reassured that the economy does not indicate an elevated downturn risk. He clarified that the rate cut represents a “recalibration” of policy, emphasizing the Fed’s proactive stance in managing economic conditions.
Investors are now digesting Powell’s assurances, and further market reactions remain to be seen.
By CNBC’s Jeff Cox, Yun Li, Hakyung Kim, and Samantha Subin.
Original Story https://www.cnbc.com/2024/09/19/cnbc-daily-open-markets-need-time-to-digest-the-50-point-cut.html
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