Volatile Stock Markets Split after Fed Rate Cut with Dow Jones Gaining 0.57%
Stocks split in different directions as the Federal Reserve issues its first interest rate cut of the year.
Quick overview
- The Federal Reserve cut interest rates by 25 basis points, leading to mixed reactions in the stock market.
- While the Dow Jones increased by 0.57%, the Nasdaq Composite and S&P 500 fell by 0.33% and 0.10%, respectively.
- Concerns over the labor market and rising inflation are contributing to market volatility following the rate cut.
- Stocks like Tesla and Apple showed resilience, while Alphabet's shares dipped after CEO Sundar Pichai sold off a significant number of shares.
On Wednesday, the Federal Reserve decided to cut interest rates by 25 basis points, creating a split in the stock market indices with the Dow Jones gaining and other indices falling.
The Nasdaq Composite index fell on Wednesday by 0.33%, and the S&P 500 fell 0.10%. However, the Dow Jones bucked the trend with an increase of 0.57%, leaving tech stocks to stumble at the September interest rate cut issued by the Federal Reserve.
The stock market is typically chaotic and volatile whenever there is a rate cut, but it also tends to shift upward on positive investor sentiment. This time, there is concern over the labor market, as shared by Fed chairman Jerome Powell. With inflation slightly increasing and unemployment claims higher than normal, there is a risk that the labor market will tighten as prices rise. That would make it harder for the labor market to recover, as business owners will be less likely to hire new employees when their own costs are so elevated.
Stocks React to Fed Cut
Some of the stocks that have been doing very well recently still managed to stay high on Wednesday as trading closed off for the day. Tesla (TSLA) has been surprising its naysayers recently by climbing throughout the month of September, and this stock was up 1.01% on Wednesday.
Apple (APPL) did not perform well last week when launching the new iPhone, but the stock has started to recover since then and was up 0.35% during mid-week trading, continuing several days of gains.
Alphabet (GOOGL) lost some ground and fell 0.65%. Company CEO Sundar Pichai sold off 25,000 shares of Google stock on Wednesday, causing the company’s value to sink slightly. Pichai has been selling off his stocks for weeks, but he has staggered those sales to keep from causing the value to plummet too quickly.
Expect the market to remain volatile this week as investors try to figure out what to do about the interest rate cut. The cut was in line with expectations, but it is the first of its kind in almost a year, and there will be a period of instability where analysts try to predict what will happen next and investors scramble to make investments that will pay off down the road.
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