Market Reactions: Fed's Bold Rate Cut Sends Stocks Lower

 U.S. stocks closed lower following the Fed's decision to cut interest rates by 0.5 percentage points, a move that surprised many investors who had anticipated a smaller cut of 0.25 percentage points.While traders had expected a rate cut, uncertainty lingered regarding the extent of the reduction. Just a week ago, the consensus was leaning toward a traditional 0.25-point cut, but expectations shifted in the days leading up to the announcement.Eleven out of twelve Fed members supported the cut, which brings the benchmark rate to a range of 4.75% to 0.5%. Most officials are projecting further cuts of at least a quarter point at upcoming meetings in November and December.Yung-Yu Ma, chief investment officer at BMO Wealth Management, called the rate cut “a welcome development” that should support the stock market moving forward. He noted that the current economic challenge is high short-term interest rates, and the Fed’s action directly addresses this issue.Following the announcement, U.S. stocks initially rose before turning negative. By 4 p.m. ET, the Dow fell 103 points (0.25%), while the Nasdaq Composite and S&P 500 both dropped 0.3%.Treasury yields also retreated, with the yield on the 10-year Treasury note settling at 3.685%, down from 3.694% before the Fed's announcement and slightly up from 3.641% the previous day.The WSJ Dollar Index fell further as the dollar weakened against a range of major currencies.