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S&P 500 and Nasdaq close higher and Dow flat after Fed cuts rates again

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U.S. stocks mostly continued their big post-election rally on Thursday, with all three major indexes hitting record highs during the session after the Federal Reserve cut interest rates.

The Fed cut its key short-term interest rate by a quarter of a percentage point to 4.5% to 4.75%, after hitting a 23-year high to 5.5% from 5.25% a few months ago. It was the second straight rate cut and followed a massive half-percentage point rate cut at the Fed's last meeting in September.

The blue-chip Dow closed flat at 43,729.34, but the broad Standard & Poor's 500 closed at a record high of 5,973.10, up 0.74%. The tech-heavy Nasdaq closed up 1.51% at a record 19,269.46.

The 10-year U.S. Treasury yield jumped on Wednesday, a rise that some economists attributed to fears that President-elect Donald Trump would increase the deficit and impose sweeping tariffs that would boost inflation again. But it fell after the Fed's interest rate announcement. The yield last fell 0.091% to 4.335% on Thursday.

What is the Fed's interest rate outlook?

Fed Chair Jerome Powell said the Fed has a “good feeling” about the economy and suggested more modest rate cuts are on the way, but the pace still depends on the data.

“They (the Fed) recognize that policy remains hawkish and that further cuts are likely, but that the pace of those cuts may slow,” wrote James Knightley, chief international affairs economist at Dutch bank ING. “They were hesitant to discuss the 'Trump effect,' but here is the risk: slightly stronger growth with more inflationary pressure. And that could lead to a less aggressive rate-cutting narrative.”

Trump has promised to introduce sweeping tariffs and tax cuts that some economists say could spur inflation again.

Economists remain divided over whether the Fed will pause interest rate cuts at its next and final meeting of the year in December or push through another quarter-point cut before a possible pause.

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Post-launch results reports

Between this week's major news, which included Tuesday's election and Thursday's Fed meeting, companies continued to report profits.

Highlights after market close include:

  • Pinterest: Beat third-quarter sales and profit estimates, but provided weak fourth-quarter sales guidance.
  • Rivian: Missed third-quarter estimates and lowered its full-year earnings outlook.
  • Airbnb: Just beat third-quarter revenue estimates, but missed on earnings.

Medora Lee is a money, markets and personal finance reporter for USA TODAY. Reach her at [email protected] and sign up for our free Daily Money newsletter every Monday through Friday morning for personal finance tips and business news.

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