Dow and S&P 500 retreat despite Fed's 0.5% rate cut

Dow and S&P 500 retreat despite Fed’s 0.5% rate cut

US stocks experienced a volatile trading session overnight, ultimately closing lower despite an unexpected half-percentage-point interest rate cut by the Federal Reserve.

While the rate cut initially buoyed market sentiment, concerns about the potential for economic weakness tempered enthusiasm.

The Dow Jones Industrial Average declined by 103.08 points, or 0.25 per cent, to finish the day at 41,503.10. The S&P 500 lost 0.29 per cent to close at 5,618.26, and the Nasdaq Composite dropped 0.31 per cent to 17,573.30. Both the S&P 500 and the Dow briefly touched record highs following the Fed's announcement but subsequently retreated.

Turning to US sectors, all closed lower overnight except for Energy and Communication Services. Utilities was the worst performer.

In company news, Intuitive Machines' shares surged by 38 per cent following the announcement of a nearly $5 billion space network contract secured from NASA. United States Steel saw a 1.5 per cent increase in shares after reports that a US security panel allowed Nippon Steel to resubmit its $14.1 billion acquisition bid for the company, likely delaying the decision until after the November presidential election. Victoria's Secret gained 3.5 per cent, following Barclays' upgrade of the stock from underweight to equal weight, citing a more balanced risk/reward outlook with an anticipated 6 per cent potential upside.

The Federal Reserve lowered its benchmark interest rate to a range of 4.75 per cent to 5.00 per cent from 5.25 per cent to 5.5 per cent, marking the first rate cut in four years as inflation has eased from its recent peak. The central bank expressed confidence in its ability to achieve its employment and inflation goals, citing a sustainable downward trend in inflation.
Investors had increasingly anticipated a half-point rate cut in the lead-up to the Fed's decision, and the central bank delivered on those expectations. However, stocks were unable to maintain their initial gains.

Federal Reserve Chair Jerome Powell sought to alleviate concerns that the rate cut signalled an underlying economic weakness. He emphasised that the decision was primarily driven by a decline in upside risks to inflation. Powell stated, "I don't see anything in the economy right now that suggests that the likelihood… of a downturn is elevated."

Futures

The SPI futures are pointing to a 0.5 per cent fall.

Currency

One Australian dollar at 7.25am was buying 67.62 US cents.

Commodities

Gold added 0.24 per cent. Silver fell 0.94 per cent. Copper added 0.61 per cent. Oil lost 0.39 per cent.

Figures around the globe

European markets closed lower. London’s FTSE lost 0.68 per cent, Frankfurt fell 0.08 per cent, and Paris closed 0.57 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei added 0.49 per cent, Hong Kong’s Hang Seng was closed, while China’s Shanghai Composite closed 0.49 per cent higher.

Yesterday, the Australian share market closed flat at 8142.

Ex-dividends

Auswide Bank Ltd (ASX:ABA) is paying 11 cents fully franked
Centrepoint Alliance (ASX:CAF) is paying 1.75 cents fully franked
Count Limited (ASX:CUP) is paying 2.25 cents fully franked
Embelton Limited (ASX:EMB) is paying 20 cents fully franked
Enero Group Ltd (ASX:EGG) is paying 2 cents fully franked
IPD Group (ASX:IPG) is paying 6.2 cents fully franked
Lycopodium Limited (ASX:LYL) is paying 40 cents fully franked
Macmahon Holdings (ASX:MAH) is paying 0.6 cents fully franked
Mader Group Limited (ASX:MAD) is paying 4 cents fully franked
Midway Ltd (ASX:MWY) is paying 1.6 cents fully franked
Midway Ltd (ASX:MWY) is paying 14.5 cents fully franked
MotorCycle Holdings (ASX:MTO) is paying 7 cents fully franked
NRW Holdings Limited (ASX:NWH) is paying 9 cents fully franked
South32 Limited (ASX:S32) is paying 4.5662 cents fully franked
Tourism Holdings (ASX:THL) is paying 4.5855 cents unfranked

Dividends payable

Ashley Services Group Ltd (ASX:ASH)
Bapcor Ltd (ASX:BAP)
Helia Group Ltd (ASX:HLI)
Helloworld Travel Ltd (ASX:HLO)
Ingenia Communities Group (ASX:INA)
Maxiparts Ltd (ASX:MXI)
Praemium Ltd (ASX:PPS)
ResMed Inc (ASX:RMD)
Shaver Shop Group Ltd (ASX:SSG)
Sonic Healthcare Ltd (ASX:SHL)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap, Marketech.

Disclaimer

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