Stocks were mixed ahead of today's rate-cut announcement by the Federal Reserve, with financials weighing on the Dow Jones Industrial Average. Two of the three major indexes closed in the green on confirmation of current expectations, as investors and policymakers continue to price in the impact of Donald Trump retaking the White House.
In line with the consensus forecast, the Fed cut its benchmark interest rate by 25 basis points on Thursday, to a target range of 4.5% to 4.75%. Officials removed a phrase from the Federal Open Market Committee's policy announcement about "greater confidence" inflation is moving toward their 2% target.
"The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance," it said. The FOMC's statement notes that labor market "conditions have generally eased, and the unemployment rate has moved up but remains low." The economy, meanwhile, "has continued to expand at a solid pace."
Fed Chair Jerome Powell held as tightly as he could to his plan to say as little as possible beyond reiterating the central bank's data dependence during his post-FOMC meeting press conference. "In the near term, the election will have no effect on our policy decisions," Powell answered in response to the first question from the media.
The central bank chief then enumerated multiple factors the Fed will consider as it assesses the appropriate level for the federal funds target range. "For December, and for every meeting, we're going to be evaluating the incoming data," Powell said.
Investors and the Fed weigh Trump’s win
In an illustration of "buy the rumor, sell the news," Trump Media & Technology (DJT) gapped down at the open and shed 23% on Thursday. The stock rose as much as 35% at one point during the previous session, fueled by its namesake's victory in the 60th U.S. presidential election.
DJT soared as Donald Trump, the 45th President of the United States, became the first man in more than 100 years to win reelection to a second, non-consecutive term in the White House.
On Election Day, Trump Media & Technology also announced its third quarter earnings. The niche social media site reported a net loss of $19.25 million, narrower than the $26.03 million loss it reported a year ago, though revenue declined to $1.01 million from $1.07 million.
No analysts cover Trump Media & Technology according to S&P Global Market Intelligence. However, in a March 26 note, Interactive Brokers Chief Strategist Steve Sosnick offered some insight on DJT stock. Sosnick said he saw "political motivations driving the stock" and "that the company's most devoted investors viewed it as a call option on the MAGA movement."
What was a good proxy for a Trump victory on Wednesday seems to be just another meme stock on Thursday.
Now the 47th president too, Trump's unconventional reelection raises one big question – and three more conventional ones – for the Fed beyond the immediate issue of today’s 25 basis point rate cut, as Nick Timiraos writes in today's Wall Street Journal.
"First, does the election result lead to meaningful changes for economic demand or inflation that warrant a different policy path?" Timiraos poses. The final three questions Timiraos identifies focus on the job market, inflation and interest rates.
The yield on the 10-year U.S. Treasury note declined by 9 basis points from Wednesday's close at 4.42%, settling at 4.33% after rising as high as 4.45% intraday.
“You can't price it all in until you see the full policy laid out," says George Goncalves, head of U.S. macro strategy at MUFG. "The bond market will sniff it out if it's truly inflationary. What the Fed will do and won't do, we’ll have to play it by ear.”
For more on today's Fed meeting and rate-cut announcement, be sure to check out Kiplinger's live Fed blog.
The labor market remains healthy
Ahead of the FOMC announcement and Powell presser, the Bureau of Labor Statistics (BLS) said initial claims for unemployment insurance for the week ended November 2 were up 3,000 to 221,000 against a consensus forecast of 220,000.
The four-week moving average declined slightly to 227,250. Continuing claims filed during the week ended October 26 were up by 39,000 to 1.89 million, the highest level since November 2021. Continuing claims were up by 69,000 from a year ago.
The BLS preliminary estimate showed that productivity was up 2.2% during the third quarter, up from a revised 2.1% in the second quarter. Output (the amount of goods and services produced) grew by 3.5% during the third quarter, the BLS estimates. Total hours worked by employees grew by 1.2%.
Productivity was up 2% year over year, down from 2.4% in the second quarter and 2.8% in the first quarter. Productivity is determined by the difference between output and hours worked. The BLS said unit labor costs were up 1.9% during the quarter, below the Fed's 2% target inflation rate.
"U.S. unit labor costs are now running above the 2% inflation target on a year-over-year basis, which may become an issue for the Fed as it faces a potentially more inflationary climate under a new government," writes BMO Capital Markets Senior Economist Sal Guatieri.
Stocks on the move
The Dow Jones Industrial Average ended the day down six-tenths of a point, or 0.0%, at 43,729, as financials led the way lower on an analyst downgrade to a sector heavyweight. The S&P 500 added 0.7% to 5,973. The tech-heavy Nasdaq Composite rose 1.5% to 19,269, helped by strong earnings reports from two non-Nvidia (NVDA) semiconductor stocks and an Uber (UBER) competitor.
JPMorgan Chase (JPM) closed down 4.3% after Baird analyst David George downgraded the stock to Sell.
"We know, and we agree," George writes. "JPM is best-in-class. It has scale, skill, and dominant market share across its various businesses, alongside a great management team. Despite that, we find the risk/reward unattractive here and urge investors to take profits."
George acknowledges "optimism market participants have around a more benign regulatory environment, along with a more pro-growth macroeconomic agenda." The issue is "expectations are quite high." George notes that JPM is trading at a trailing book value of approximately 2.6, as well as more than 14 times 2026 earnings per share estimates – "close or at all-time highs."
George also acknowledges "we are fighting the tape here but believe it makes sense to sell the stock here given what we see as limited upside."
Qualcomm (QCOM) closed slightly lower after gapping up at the open on management's report that the technology company beat top- and bottom-line expectations for its fiscal 2024 fourth quarter, issued guidance for its fiscal 2025 first quarter that was also ahead of expectations and announced a new $15 billion share repurchase authorization.
"Qualcomm has defined the cutting-edge cellular standard by consistently 'moving the goal posts' in baseband capabilities for the last two decades," says Stifel analyst Christopher Rolland in a note. "Every time a competitor matches Qualcomm's technology, they quickly add important new 'table-stakes' features. Additionally, the company's efforts around diversification are paying off as the company transcends handsets."
Arm Holdings (ARM) stock rose 4.1% after the semiconductor and software design company beat top- and bottom-line expectations for its fiscal 2025 second quarter and issued guidance for its third quarter that was also ahead of expectations.
"Arm emerged along with the foundry/fabless ecosystem to command an overwhelming share of the smartphone processor market," says Needham analyst Charles Shi. "We think the company's strong control over the smartphone ecosystem and consequent pricing power can support growth, but it will face challenges when trying to replicate its success in other technology sectors, most notably IoT [Internet of Things] and high-performance computing."
Lyft (LYFT) stock surged 22.9% after the ride-hailing company beat top- and bottom-line expectations for its third quarter and raised its full-year outlook.
"Our team delivered one of the strongest quarters in Lyft history," CEO David Risher said.
"We are encouraged by positive commentary in the quarter suggesting healthy progress along product initiatives and new partnerships," says Wedbush analyst Scott Devitt. "That said, we continue to view management's longer-term targets with some skepticism, and we remain sidelined as we wait for clear evidence of a more sustainable growth trajectory for the business."
