US stocks closed higher after the Federal Reserve announced an interest rate cut, extending a sharp rally sparked by Donald Trump's return as US president.
US stocks have closed higher after the Federal Reserve announced a cut of 25 basis points in interest rates, extending a sharp rally sparked by Donald Trump's return as US president.
The Fed cut interest rates by a quarter of a percentage point on Thursday as policymakers took note of a job market that has "generally eased" while inflation continues to move towards the US central bank's two per cent target.
Markets had almost fully priced in a 25-basis-point rate cut for the November meeting and will eye upcoming commentary from the central bank for guidance about the path of monetary policy.
Investor expectations that Trump would lower corporate taxes and loosen regulations sparked a surge in each of the three major indexes in the prior session, with both the Dow Industrials and S&P 500 recording their largest one-day percentage jumps in two years.
"In an action-packed week, the Fed didn't add any drama. Cutting by 25 basis points still keeps the federal funds rate restrictive, but not as restrictive as it was," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.
"Elections have consequences and we could see a marginal improvement in growth relative to their forecasts, but also a marginal increase in inflation relative to their forecasts. That would call for a more gradual pace of rate reductions."
The Dow Jones Industrial Average fell 0.59 point, or flat, to 43,729.34, the S&P 500 gained 44.06 points, or 0.74 per cent, to 5,973.10 and the Nasdaq Composite gained 285.99 points, or 1.51 per cent, to 19,269.46.
Communications services, up 1.92 per cent, led S&P sector gains, buoyed by a jump of 11.81 per cent in Warner Bros Discovery after a surprise third-quarter profit.
Financials were the weakest of the 11 major S&P sectors, down 1.62 per cent to give back some of the outsized gains in the prior session, as banks declined 3.09 per cent after a surge of nearly 11 per cent on Wednesday.
JP Morgan lost 4.32 per cent and Goldman Sachs shares shed 2.32 per cent to weigh on the Dow.
Expectations for continued rate cuts have been dialled back recently, however, as economic data continues to point to a resilient economy and the potential for higher inflation as a result of likely tariffs and increased government spending under Trump's administration.
Fed chair Jerome Powell said no decision had been made on what sort of policy action the central bank would take in December but the central bank was "prepared to adjust our assessment of the appropriate pace and destination" for monetary policy amid uncertainty.
Investors are also eying whether Republicans could win control of both houses of Congress, making it easier for Trump's agenda to proceed.
Treasury yields, which have surged in recent weeks, retreated after a sharp rise on Wednesday, as the benchmark 10-year yield eased from a four-month high of 4.479 per cent, before briefly paring declines slightly after the Fed statement and were last at 4.332 per cent.
