Federal Reserve Chairman Jerome Powell's news conference appears on a television screen on the floor of the New York Stock Exchange. AP
Federal Reserve Chairman Jerome Powell's news conference appears on a television screen on the floor of the New York Stock Exchange. AP

Wall Street edges lower after Fed delivers jumbo interest rate cut



US stock indexes edged lower on Wednesday in a volatile day of trading after the Federal Reserve began its latest easing cycle with an aggressive 50-basis point cut.

After the announcement, Fed chairman Jerome Powell said inflation has eased “significantly” over the past two years, allowing the central bank to now focus on protecting the US labour market and economy. The decision lowers the Fed's benchmark range from 5.25-5.50 per cent to 4.75-5.00 per cent.

“This recalibration of our policy stance will help maintain the strength of the economy and the labour market, and will continue to enable further progress on inflation as we begin the process of moving towards a more neutral stance,” Mr Powell told reporters.

The Fed's preferred inflation metric has fallen to 2.5 per cent since its peak rate at 7.1 per cent in 2022. Meanwhile, the unemployment rate has climbed to 4.2 per cent and average payroll gains have fallen to 116,000 over the past three months.

“The Fed is shifting from fighting inflation to preventing a downturn in the economy,” said Kenneth Kim, senior economist at accounting firm KPMG.

The Dow Jones Industrial Average fell 103 points to 41,503.10, although it is still near the all-time high it set on Monday. The S&P 500 closed 0.29 per cent lower, while the Nasdaq Composite dipped 0.31 per cent.

“Not an extraordinary end of day market reaction to what in can certainly be seen as a bit of a surprise,” said Art Hogan, chief market strategist at B Riley Wealth, adding that it was also difficult to gauge market reaction considering the news conference ended about 40 minutes before the closing bell.

Although a 25-basis point cut was predicted by most economists, futures markets placed the probability of the larger 50-basis point cut at about two thirds heading into Wednesday's decision.

Mr Hogan said the larger rate cut showed a strong signal that the Fed is determined to bring rates closer to the neutral rate “in a fashion that won't take as much heavy lifting by the end of the calendar year”.

Quarterly projections released by the Federal Open Market Committee showed it expects to reduce rates by a further 50 basis points in the final two meetings this year. The median Fed official forecast rates would be cut by another full percentage point in 2025.

Mr Powell denied that the central bank was behind the curve on cutting interest rates. A number of officials in July suggested they would have been open to a rate cut then.

“There's no sense that the committee feels it's in a rush to do this,” he said.

Treasury yields also experienced volatility, with the 10-Year Treasury edged up to 3.71 per cent as of 5pm ET. The two-year Treasury rose to 3.62 per cent.

“Markets had largely priced in what the Fed gave us. It allowed for some room for traders to take profits here given that it's already priced in to a significant degree. So a little bit of profit-taking,” said John Canavan, lead analyst at Oxford Economics.

Mr Canavan said there could be a corrective rise in yields during the near term, which could push down equities.

“But that's really just a short-term position more than anything, in my view, and the longer-term outlook is that the economy will remain on solid footing,” he said.

“The Fed will continue to ease, and the combination will continue to move Treasury yields lower over the next year, offering equities good support.”

The Central Bank of the UAE joined the Fed in cutting rates by 50 basis points on Wednesday. Central banks in England and Japan are expected to hold rates steady when they meet this week.

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Singham Again

Director: Rohit Shetty

Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone

Rating: 3/5

If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.

When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.

How to get there: Emirates currently flies from Dubai to Orlando five times a week.
Red Joan

Director: Trevor Nunn

Starring: Judi Dench, Sophie Cookson, Tereza Srbova

Rating: 3/5 stars

UAE rugby in numbers

5 - Year sponsorship deal between Hesco and Jebel Ali Dragons

700 - Dubai Hurricanes had more than 700 playing members last season between their mini and youth, men's and women's teams

Dh600,000 - Dubai Exiles' budget for pitch and court hire next season, for their rugby, netball and cricket teams

Dh1.8m - Dubai Hurricanes' overall budget for next season

Dh2.8m - Dubai Exiles’ overall budget for next season

The specs

Engine: 1.5-litre turbo

Power: 181hp

Torque: 230Nm

Transmission: 6-speed automatic

Starting price: Dh79,000

On sale: Now

Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Rating: 2/5
 
Avatar%20(2009)
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Spider-Man%202
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The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Power: 268bhp / 536bhp
Torque: 343Nm / 686Nm
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
On sale: Later this year
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3ENamara%0D%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3EJune%202022%0D%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3EMohammed%20Alnamara%0D%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%20%0D%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EMicrofinance%0D%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%20%3C%2Fstrong%3E16%0D%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3ESeries%20A%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EFamily%20offices%0D%3Cbr%3E%3C%2Fp%3E%0A
Where to buy

Limited-edition art prints of The Sofa Series: Sultani can be acquired from Reem El Mutwalli at www.reemelmutwalli.com

Disclaimer

Director: Alfonso Cuaron 

Stars: Cate Blanchett, Kevin Kline, Lesley Manville 

Rating: 4/5

Updated: September 18, 2024, 10:18 PM

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