Wall Street Indexes Rebound After Rate-Outlook Adjustment Sell-off In Previous Session

Barry Adams
19 Dec, 2024
New York City

Investors struggled to adjust interest rate expectations after the Federal Reserve offered a more cautious outlook for 2025. 

The S&P 500 index jumped 1% and the Nasdaq Composite advanced 0.9% a day after a sharp fall on Wall Street. 

The Federal Reserve cut its overnight lending rate range by 25 basis points to between 4.25% and 4.50% and also signaled a possible rate cut of 50 basis points in 2025. 

The possible rate-cut outlook was revised to 50 basis points from the previous estimate of 100 basis points, denting market enthusiasm and halting the roaring bull market. 

The Federal Reserve raised its economic growth and inflation estimate but lowered its unemployment rate outlook, prompting many investors on Wall Street to forecast the Fed to pause rates at the end of its next meeting in January. 

The Fed revised its GDP growth estimate in 2024 to 2.5% from the previous estimate of 2.0% in September, the unemployment rate to 4.2% from 4.4%, and PCE price inflation to 2.4% from 2.3%, respectively. 

Separately, the U.S. Bureau of Economic Analysis lifted its annualized third quarter GDP growth estimate to 3.1% from the second estimate of 2.8% and above 3.0% in the second quarter. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.7% to 5,912.08, the Nasdaq Composite rose 0.9% to 19,562.72, and the Russell 2000 index advanced by 0.7% to 2,245.19. 

The yield on 2-year Treasury notes edged higher to 4.33%, 10-year Treasury notes inched up to 4.55%, and 30-year Treasury bonds increased to 4.74%.

WTI crude oil increased $0.42 to $70.44 a barrel, and natural gas prices edged up 10 cents to $3.47 a thermal unit.

Gold increased by $10.45 to $2,598.70 an ounce, and silver fell by $0.18 to $29.13. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher by 0.01 to 108.09.

 

U.S. Stock Movers 

Micron Technology, Inc. plunged 16% to $87.08 after the advanced chipmaker reported fiscal first quarter results that met investor expectations. 

However, the company's fiscal second quarter outlook fell short of market expectations. 

Lamb Weston Holdings dropped 17.1% to $64.88 after the frozen potato maker reported weaker-than-estimated quarterly results. 

Revenue in the fiscal second quarter ending on November 24 decreased 8% to $1.6 billion, and net income swung to a loss of $36.1 million from a profit of $215 million, and diluted earnings per share swung to a loss of 25 cents from a gain of $1.48 a year ago. 

The company attributed its profit weakness to higher-than-anticipated manufacturing costs and softer volumes, and the frozen potato maker estimated softness to persist well into the next fiscal year. 

The company reduced its fiscal 2025 net sales target range to between $6.35 billion and $6.45 billion, net income between $330 million and $350 million, and diluted earnings per share between $2.30 and $2.45. 

Darden Restaurants jumped 14.4% to $182.70 after the operator of The Olive Garden and LongHorn Steakhouse chain reported better-than-expected fiscal second quarter results. 

The restaurant company also lifted its annual revenue outlook.