Market turbulence persists as doubt grows over the anticipated number of additional interest rate reductions by the Federal Reserve
In a move that sent ripples through the financial world, the Federal Reserve (Fed) cut its main interest rate for the first time this year. The decision, made on Wednesday, saw the Dow Jones industrial average rise 260 points, or 0.6%, while the Nasdaq composite fell 0.3%. The S&P 500 slipped 0.1%.
The Fed's decision comes as the job market is slowing while inflation remains high. The current chair of the Federal Reserve, Jerome Powell, whose term as chair ends in May 2026, noted that the projections are not guaranteed.
The cut was in response to increased risks to employment, as the Fed had been holding rates steady this year due to the threat of President Trump's tariffs. The yield on the 10-year Treasury rose to 4.07% from 4.04%, having briefly dropped below 4% after the Fed released its projections.
The Fed's projections indicate two more interest rate cuts by the end of 2019 and one more in 2026. However, stocks initially rose following the release of the projections, but later gave back gains. The S&P 500 fell 6.41 points to 6,600.35.
In other market news, Workday increased its program for sending cash to investors through stock purchases to $4 billion. The move came after Elliott Investment Management disclosed a stake of over $2 billion in the company. Workday rose 7.2% following the announcement, with Elliott Investment Management supporting the company's management.
Meanwhile, StubHub slumped 6.4% from its initial public offering price in its debut on the New York Stock Exchange. RCI Hospitality Holdings, which owns strip clubs and sports bars across the country, including Rick's Cabaret, also saw a drop in its shares following accusations of bribery and other crimes by New York's attorney general. RCI Hospitality Holdings dropped 10.4% as a result.
Big Tech stocks, such as Nvidia and Broadcom, were the heaviest weights on the market, leading to market losses. The Russell 2000 index of smaller stocks surged more than 2% after the Fed's projections, but later pared its gain to a rise of 0.2%.
Japan's Nikkei 225 slipped 0.2% due to a 13.8% drop in exports to the U.S. in August, caused by Trump's tariffs. The Dow Jones industrial average also rose 260.42 points, while the Nasdaq composite fell 72.63 points.
In conclusion, the stock market showed mixed signals following the Fed's decision to cut interest rates for the first time this year. While some stocks, such as Workday, saw gains, others, like StubHub and RCI Hospitality Holdings, experienced losses. The job market and inflation remain areas of concern, with the Fed projecting two more interest rate cuts by the end of 2019.
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