Indexes close higher after Fed cuts interest rates

By Sinéad Carew and Johann M Cherian

Wall Street ended higher on Wednesday, after the Federal Reserve cut interest rates by a quarter percentage point and signaled that it will likely put further rate cuts on pause for now as its estimates pointed to a solid economy.

The central bank said that before its next policy change it would look ahead for clearer signals about the direction of the job market and inflation that "remains somewhat elevated."

But projections after the Fed's two-day meeting showed median expectations for another quarter-point cut in 2026, in line with expectations at the September meeting.

Policymakers raised expectations for 2026 GDP growth to 2.3% from 1.8% in September and maintained an estimate for unemployment at the end of next year at 4.4%.

Fed Chair Jerome Powell said policy is well positioned to respond to what lies ahead for the economy but declined to provide guidance on whether there will be another rate cut in the near future.

The economic projections along with the lack of an overly hawkish tone encouraged equity investors.

"When the Fed is cutting rates and the economy is not headed into an imminent downturn or recession, markets tend to like that backdrop," said Mona Mahajan, head of investment strategy at Edward Jones in New York.

The market had been muted ahead of the statement as investors, while widely expecting a cut, were concerned the Fed would take a more hawkish tone on the policy outlook. Some investors disagreed with the Fed's signal for a pause in rate cuts, citing labor market concerns.

"The statement emphasized weakness in the labor market as the principal rationale for the 25 basis point cut, and this detail is what the market has picked up on, suggesting the Fed could continue easing policy, even though the expectations for easing in 2026 haven’t changed with one 25 basis point priced in," said Michael Rosen, chief investment officer, Angeles Investments.

According to preliminary data, the S&P 500 SPX gained 46.30 points, or 0.67%, to end at 6,886.26 points, while the Nasdaq Composite IXIC gained 72.41 points, or 0.33%, to 23,654.40. The Dow Jones Industrial Average DJI rose 501.03 points, or 1.05%, to 48,061.32.

Among the S&P 500's 11 major industry sectors, industrials (.SLRCI) was the biggest gainer. That sector's biggest percentage gainer was energy equipment manufacturer GE Vernova <GEV.N>, which surged after forecasting higher revenue in 2026, signaling strong demand for its AI-related infrastructure.