NEW YORK (AP) — Wall Street is rising near its records on Wednesday after the Federal Reserve kicked off its efforts to prevent a recession with a bigger-than-usual cut to interest rates.
The S&P 500 was 0.5% higher in afternoon trading and at the edge of its all-time closing high set in July. The Dow Jones Industrial Average was up 175 points, or 0.4%, and on track to top its record set on Monday. The Nasdaq composite was 0.8% higher, as of 2:20 p.m. Eastern time.
The momentous move by the Fed helps financial markets in two big ways. It eases the brakes off the economy, which has been slowing, and it also gives a boost to prices for all kinds of investments. Besides stocks, gold and bond prices had already rallied in recent months on expectations that cuts to rates were coming.
Because the cut was so well telegraphed, and markets had already moved so much in anticipation of it, Wall Street’s reactions weren’t that big on Wednesday despite the historic nature of the Fed’s action. It was the first cut to rates in more than four years, and it closes the door on a run where the Fed jacked the federal funds rate to a two-decade high in hopes of slowing the economy enough to stifle the worst inflation in generations.
Now that inflation has eased back significantly from its peak two summers ago, the Fed has said it can turn more of its attention toward protecting the job market and overall economy, which have under the weight of higher rates.
The only question is how much the Fed will cut rates by to do so, which can prove to be a tricky balance. Lowering rates would ease the brakes off the economy by making it easier for U.S. businesses and households to borrow. But it could also offer more fuel for inflation.
The Fed released forecasts Wednesday that said its median official expects to cut the federal funds rate by another half of a percentage point through the end of the year. That could indicate a traditional-sized cut of a quarter of a percentage point at each of its two remaining meetings scheduled for 2024.
After that, the median Fed official is projecting another full percentage point in cuts during 2025.
Making things complicated, some critics say the Federal Reserve is moving too late to protect the economy and may have missed the window to prevent a recession. Others, meanwhile, are saying it will need to be careful about cutting rates too much because of the possibility that inflation remains stubbornly higher than it has in recent decades.
Treasury yields were mixed following the Fed’s move.
The 10-year Treasury yield edged down to 3.64% from 3.65% late Tuesday. The two-year yield, which more closely follows expectations for Fed action, fell more sharply to 3.55% from 3.60%.
On Wall Street, Intuitive Machines soared 42% after NASA awarded it with a contract worth up to $4.82 billion for communication and navigation services the space agency will use to establish a long-term presence on the moon.
Trading in Tupperware Brands remained halted after the company filed for Chapter 11 bankruptcy protection. Its stock has been sinking, down to 51 cents, since a mini-revival early in the pandemic sent its stock above $30.
McGrath RentCorp., a company that rents and sells mobile office trailers, portable classrooms and other structures, fell 4.6% after it agreed to terminate its proposed buyout by WillScot following tough scrutiny of the deal from U.S. regulators.
In stock markets abroad, indexes were modestly lower in Europe after finishing higher in much of Asia.
The Bank of Japan and the Bank of England are also holding monetary policy meetings later this week. Neither central bank is expected to move on rates, though the language of what the officials say could be an indicator of later moves and still influence markets.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
