Stock markets spiked and then immediately reversed course after the Federal Reserve lowered the federal funds rate by a quarter percentage point to 4% from 4.25% on Wednesday in a move that had been telegraphed for weeks leading up to the meeting. Newly sworn in Federal Reserve Governor Stephen I. Miran voted against the action, in favor of a steeper cut of half a percentage point, the Fed disclosed in its monetary policy update. Miran was the only member to dissent.
Stock markets, which have been at all-time highs, rose in response to the decision to cut rates by 25 basis points, but dropped down soon after. The S&P 500 closed down 0.1%, the Nasdaq closed down .33%, and the Dow Jones Industrial Average closed up 0.57%. The Russell 2000, which includes smaller-cap stocks, rose 0.26%. Gold prices jumped to $3,704 an ounce before sinking back to $3,665.
In the options market, there was an initial spike in put activity—trading in put options that give an investor the opportunity to sell stock at a specific price—that likely represented increased hedges as investors look to protect themselves on the downside, said Andrew Hiesinger, founder and CEO of Quant Data. He noted that the cut was expected but investors are looking for signals about whether they can expect two more cuts this year and the outlook for 2026.
