NEW YORK (AP) 鈥� U.S. stock indexes edged lower Wednesday after the Federal Reserve kicked off its efforts to with a to interest rates.
The S&P 500 slipped 0.3% to pull 0.9% below its all-time high set in July. The Dow Jones Industrial Average dipped 103 points, or 0.2%, though it remains close to its record . The Nasdaq composite lost 0.3%.
The momentous move by the Fed helps financial markets in two big ways. It eases the brakes off the economy, which has under the weight of higher rates, and it gives a boost to prices for all kinds of investments. Besides stocks, gold and bond prices had already rallied in recent months on expectations that cuts to rates were coming.
Because the move was so well telegraphed, and because markets had already climbed so much in anticipation of it, Wall Street鈥檚 reactions were relatively muted despite the Fed鈥檚 historic action. It marked the first cut to the federal funds rate in over four years, and it closed the door on a stretch where the Fed kept rates at a two-decade high to slow the economy enough to stifle the worst inflation in generations.
Now that significantly from and appears to be heading toward 2%, the Fed says it it can turn more of its attention toward protecting the slowing job market and overall economy.
鈥淭he time to support the labor market is when it鈥檚 strong and not when you begin to see the layoffs,鈥� Fed Chair Jerome Powell said. 鈥淭hat鈥檚 the situation we鈥檙e in.鈥�
The only question is how much the Fed will ultimately cut rates by to do so, which can prove to be a tricky balance. Lowering rates would help the economy by making it easier for U.S. businesses and households to borrow. But it could also offer more fuel for inflation.
The Fed released forecasts Wednesday that said its median official expects to cut the federal funds rate by another half of a percentage point through the end of the year. That could mean a traditional-sized cut of a quarter of a percentage point at each of its two remaining meetings scheduled for 2024.
After that, the median Fed official is projecting another full percentage point of cuts during 2025.
Some critics say the Federal Reserve may have already kept interest rates too high for too long, doing damage to the economy.
鈥淲hen the Fed is behind the curve, it sometimes takes a big move to catch up to where they should have been all along,鈥� said Brian Jacobsen, chief economist at Annex Wealth Management.
鈥淲e don鈥檛 think we鈥檙e behind,鈥� Powell said in a press conference following the Fed鈥檚 announcement. 鈥淲e think this is timely. But I think you can take this as a sign of our commitment not to get behind,鈥� pointing to Wednesday鈥檚 hefty cut of half a percentage point. Powell called it a 鈥済ood strong start to this.鈥�
Other critics, meanwhile, say the Fed will need to be careful about cutting rates too much because of the possibility that inflation will remain stubbornly higher than it鈥檚 been in recent decades.
Powell repeated several times that the Fed does not feel 鈥渁 rush to get this done鈥� and will make its decisions on interest rates at each successive meeting, depending on what incoming data say.
鈥淲e鈥檒l move as fast or as slow as we think is appropriate in real time,鈥� he said. For now, he said, 鈥渢he U.S. economy is in a good place, and our decision today is designed to keep it there.鈥�
Like stock prices, Treasury yields wavered up and down repeatedly immediately after the Fed announced its cut and published its projections.
The 10-year Treasury yield eventually rose to 3.70% from 3.65% late Tuesday. The two-year yield, which more closely follows expectations for Fed action, edged up to 3.62% from 3.60% late Tuesday.
On Wall Street, Intuitive Machines soared 38.3% after NASA awarded it with a contract worth up to $4.82 billion for communication and navigation services the space agency will use to establish a long-term presence on the moon.
Trading in Tupperware Brands remained halted after the company . Its stock has been sinking, down to 51 cents, since a mini-revival early in the pandemic sent its stock above $30.
McGrath RentCorp, a company that rents and sells mobile office trailers, portable classrooms and other structures, fell 3.1% after it agreed to terminate its proposed buyout by WillScot following tough scrutiny of the deal from U.S. regulators.
All told, the S&P 500 slipped 16.32 points to 5,618.26. The Dow dropped 103.08 to 41,503.10, and the Nasdaq composite lost 54.76 to 17,573.30.
In stock markets abroad, indexes fell modestly in Europe after rising in much of Asia.
and the Bank of England are also holding monetary policy meetings later this week. Neither central bank is expected to move on rates, though the language of what the officials say could be an indicator of later moves and still influence markets.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
Stan Choe, The Associated Press
