Wall Street’s new era is off to rocky start as Fed sows doubts
Jerome Powell delivered exactly what traders up and down Wall Street had long hoped for: A big interest-rate cut that would justify this year’s steep rally in stocks and bonds as the era of tight monetary policy finally began to reverse.
Equities, especially those of economically sensitive companies, briefly surged Wednesday, driving the S&P 500 up as much as 1%. Ditto bonds, while the prospect of easy money ahead initially pushed up speculative assets like crypto.
Yet by the time the trading day ended, the gains fizzled as a more sobering economic and market reality sunk in. Even with the half-point rate cut — the kind of aggressive move usually reserved for a recession or crisis — and more on the way, the investment backdrop was no more clear cut than it was before.
Stock prices are already near record highs. The economy is losing a little steam. And it’s no sure thing that the rock-bottom rates swept away by post-pandemic inflation will come back anytime soon.
From stocks to Treasuries, corporate bonds to commodities, every major asset was down Wednesday. While the scale of the declines were minor, a concerted pullback like that hadn’t followed a Fed policy decision since June 2021.
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