The S&P 500 ETF (SPY) closed slightly in the red, while the Nasdaq 100 ETF (QQQ) closed in positive territory after the Fed held its Federal Open Market Committee (FOMC) meeting.
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The central bank voted to cut rates by 25 bps, the second reduction this year. Of the 12 voting members, 10 voted in favor, while Fed Governor Stephen Miran dissented for a 50 bps cut and Kansas City Fed President Jeff Schmid called for no change.
The Fed said that the economy is expanding at a “moderate pace” amid “somewhat elevated” inflation. In addition, the unemployment rate has ticked higher but remains low. Later comments from Fed Chair Jerome Powell that the Fed had differing opinions on whether to cut by another 25 bps in December triggered a sharp drop in stocks, although the majority of the losses were recovered by the end of the trading session.
“There’s a growing chorus now of ‘maybe this is where we should at least wait a cycle,'” Powell said. He added that inflation and labor market data would influence the Fed’s December decision, and that AI has factored into rising layoffs and could hurt job creation in the future. Following Powell’s comments, the odds of another 25 bps cut by year-end dropped to 55.5% from 90.5% on CME’s FedWatch tool.
Meanwhile, President Trump is set to meet with Chinese President Xi Jinping on Thursday at 11 a.m. Eastern Time. Topics on the agenda will likely include rare earths, soybeans, curbing illegal fentanyl shipments, and semiconductors. Ahead of the meeting, Trump teased the prospects of a U.S.-China trade deal.
“We’re going to be, I hope, making a deal. I think we’re going to have a deal. I think it will be a good deal for both,” Trump said in South Korea. He also confirmed a U.S.-South Korea trade deal that will result in $350 billion of investments in the U.S. over several years. $200 billion will be in cash investments maxed at $20 billion per year, while the remaining $150 billion will be allocated to a shipbuilding partnership. In return, the U.S. will lower the tariff rate on South Korean autos to 15% from 25%.
The S&P 500 (SPX) closed with a less than 0.01% loss, while the Nasdaq 100 (NDX) returned 0.41%.
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