Fed Slashes Interest Rates: S&P 500 and Gold Hit All-Time Highs, Small Caps Rally (UPDATED)

The Federal Reserve’s decision to cut interest rates by 0.5% has sparked a rally in the markets, with the S&P 500 hitting all-time highs and small caps surging. This move marks the beginning of a highly anticipated cutting cycle by the central bank, with the target fed funds rate now ranging between 4.75% and 5%.

The SPDR S&P 500, which tracks the S&P 500 index, was up 0.44% at all-time highs, led higher by companies like Arm Holdings Plc, The Trade Desk Inc, Toyota Motor Corp, General Motors Co, and Marriott International. The materials sector, as tracked by the Materials Select Sector SPDR Fund, showed the most strength, climbing approximately 0.6% following the rate cut. On the other hand, the energy sector, tracked by the Energy Select Sector SPDR Fund, was down 0.3% after performing well ahead of the Fed decision.

In addition to the stock market reaction, other asset classes also experienced volatility. Crypto markets were turbulent, with Bitcoin down 0.86% and Ethereum down 1.79% following the rate cut. The increased volatility is attributed to uncertainty heading into the Fed meeting, with market projections favoring a larger rate cut.

The updated quarterly Dot Plot indicates a more aggressive path for rate cuts than previously projected, with a median projection of a total of 1% in rate cuts in 2024. This signals a more dovish stance by the Fed in response to economic conditions.

Overall, the market reaction to the Fed’s rate cut has been positive, with stocks hitting all-time highs and small caps rallying. Investors will be closely watching for further guidance from the Fed on future rate cuts and economic outlook.

In conclusion, the Fed’s decision to cut rates has had a significant impact on the markets, with the S&P 500 reaching new highs and small caps surging. The increased volatility in various asset classes reflects the uncertainty surrounding the economic environment. Investors should stay informed and monitor developments closely to navigate the evolving market conditions.