Stock Market Overview: U.S. stock markets showed a modest retreat on Friday after Thursday’s Fed-driven enthusiasm. The S&P 500 and Dow Jones Industrial Average hit record highs on Thursday, responding to the Federal Reserve’s significant interest rate cut. However, the upward momentum slowed as the week came to a close.
Globally, markets showed mixed results. Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index both posted gains of over 1%, while Europe’s Stoxx 600 fell. The Bank of Japan maintained its interest rates at 0.25%, while China’s central bank unexpectedly held its benchmark lending rates steady, surprising economists.
Impact of Triple-Witching Day on Volatility
Investors should note that Friday marked a “triple-witching” day, the quarterly event when index options, index futures, and single-stock options expire simultaneously. These expirations typically increase market volatility, contributing to the more subdued market action.
In recent trading:
- U.S. stocks edged lower: The S&P 500, Dow Jones, and Nasdaq Composite each fell by less than 0.5%.
- Nike and FedEx moved significantly: Nike saw gains due to a CEO switch, while FedEx tumbled following a reduced earnings outlook.
- U.S. dollar gained strength: The greenback advanced against the Japanese yen.
U.S. Stock Market Performance & the Fed’s Influence
Friday’s retreat in the stock market followed Thursday’s surge, where the Dow Jones hit a record high above 42,000 and the S&P 500 crossed the 5,700 mark for the first time. Despite the pullback, all three major indexes—S&P 500, Dow, and Nasdaq—remained on track for weekly gains. The S&P 500 was up 1.2% for the week, poised for its fifth positive week in six, with year-to-date gains of over 19%. Both the Dow and Nasdaq were up 1.4%.
The Federal Reserve’s 50-basis point rate cut on Wednesday, the first of its kind since 2020, sparked investor optimism. The delayed rally on Thursday saw investors flocking to tech stocks like Nvidia and companies expected to benefit from lower rates, such as Home Depot.
Fed Governor Christopher Waller commented on Friday that inflation is coming down faster than expected, justifying the aggressive rate cut. Investors perceived the Fed’s proactive measures as a positive signal for sustaining economic momentum, rather than a reactive move to stabilize it.
According to Mark Hackett, Nationwide’s chief of investment research, “The Fed’s sizable rate cut served as a catalyst, instilling confidence in investors who now view the market with a ‘glass half full’ mentality.”
Challenges Ahead: FedEx Dents Sentiment
However, not all news was positive. FedEx delivered disappointing news on Friday by slashing its earnings outlook, which sent its stock down nearly 11%. In response, competitor UPS also fell more than 3%. The dip in FedEx shares put some pressure on the broader market, slightly dampening the positive momentum generated by the Fed’s actions.
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Bitcoin Gains as Cryptocurrencies Rally
Bitcoin continued its upward trajectory, rising over 1% to hit $63,514 by Friday morning—its highest point since mid-August. The cryptocurrency was on track for a second consecutive week of gains, up about 6%. Sentiment around Bitcoin and broader cryptocurrency markets improved, buoyed by the Federal Reserve’s 50-basis point rate cut.
The Fed’s decision to slash rates has spurred risk appetite, as lower interest rates free up liquidity for speculative assets like cryptocurrencies. Initially, Bitcoin had a mixed response to the rate cut but eventually tracked the broader market’s uptrend.
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