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Fed cuts rates by 50 basis points

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Intuitive Machines soars after clinching NASA contract

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Indexes up: Dow 0.40%, S&P 500 0.52%, Nasdaq 0.79%

By Chuck Mikolajczak

NEW YORK, Sept 18 (Reuters) -

U.S. stocks shot higher on Wednesday after the Federal

Reserve cut interest rates by 50 basis points, the high side of

estimates for its first cut in more than four years.

Citing a "greater confidence" that inflation is moving

towards the central bank's 2% target, the

Fed cut rates

by half of a percentage point, as it now focuses on keeping

the labor market healthy.

"The Fed ended the pause with a bang. It's a strong

signal that they cut by 50 bps and expect another 50 basis

points of cuts this year," said Brian Jacobsen, chief economist

at Annex Wealth Management in Menomonee Falls, Wisconsin.

"The Fed is projecting that by front loading the cuts

they can stick the landing with the unemployment rate at 4.4%

and inflation dropping to target quickly."

Market expectations for the size of the rate cut had

been volatile in recent days, pricing in about a 65% chance for

a 25 basis point cut last week to a 57% chance for the larger 50

basis point cut earlier on Wednesday, according to CME's

FedWatch Tool.

Borrowing costs had been parked at their highest levels in

over two decades since July 2023, when the central bank last

hiked interest rates by 25 basis points to between 5.25% and

5.50% to combat inflation.

The Dow Jones Industrial Average rose 165.62 points,

or 0.40%, to 41,771.80, the S&P 500 gained 29.06 points,

or 0.52%, to 5,663.64 and the Nasdaq Composite gained

139.26 points, or 0.79%, to 17,767.32.

Smallcap stocks, seen as more likely to benefit from a

lower interest rate environment, moved higher, with the Russell

2000 up more than 1%.

Markets have rallied this year, with all three major indexes

setting record highs on prospects of lower interest rates as

inflation moderated and the jobs market showed gradual signs of

cooling.