Powell’s “risk management” remarks trigger drop, then rebound
Intel soars on Nvidia investment, fueling tech stock rally
Unemployment claims see largest drop in four years
All three major U.S. stock indexes in New York rose on September 18 (local time). Following the Federal Reserve's resumption of interest rate cuts the previous day, buying momentum surged across technology stocks as Intel soared nearly 30% on news that it would receive an investment from Nvidia.
As of 10:58 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average was up 125.42 points (0.27%) from the previous session at 46,143.74. The S&P 500 Index, which focuses on large-cap stocks, rose 35.84 points (0.54%) to 6,636.19, while the tech-heavy Nasdaq Index jumped 220.598 points (0.99%) to 22,481.924.
By stock, Intel surged 25.56%. The news that Nvidia will invest $5 billion in Intel to jointly develop semiconductors is driving Intel’s share price higher. Nvidia also climbed 3.04%. Microsoft is up 0.26%, while Meta, the parent company of Facebook, and Tesla are showing gains of 1.23% and 0.92%, respectively.
The previous day, the Federal Reserve decided at the regular Federal Open Market Committee (FOMC) meeting to lower the federal funds rate by 0.25 percentage points to a range of 4.0% to 4.25% per year. This move came after maintaining a freeze for nine months since the last rate cut in December of the previous year. The recent weakness in employment indicators was a contributing factor. The Fed also indicated the possibility of two additional rate cuts within the year, meaning it could lower rates by 0.25 percentage points each at the remaining October and December meetings. This is one more cut than was projected in the dot plot outlook released in June. In 2026 and 2027, one rate cut of 0.25 percentage points each is expected.
Federal Reserve Chair Jerome Powell explained the decision as a "risk management cut." As a result, confidence in consecutive rate cuts weakened and investor expectations were somewhat dampened the previous day, but the market rebounded within a day.
Robert Shine, Managing Director and Partner at Blanke Shine Wealth Management, commented, "The Fed is cutting rates while stock prices are at all-time highs and the economy is still growing," adding, "This is positive for the stock market."
The employment indicators released that day showed stability. According to the U.S. Department of Labor, new unemployment benefit claims for the week of September 7-13 totaled 231,000, a decrease of 33,000 from the previous week (264,000), marking the largest drop in four years. This figure also came in below Bloomberg's forecast of 240,000. Continuing claims for unemployment benefits, for those receiving benefits for more than two weeks, stood at 1.92 million for the week of August 31 to September 6, slightly down from 1.927 million the previous week, and below the market forecast of 1.95 million. This result contrasts with the recent upward trend.
The value of the dollar is rising. The dollar index, which measures the value of the U.S. dollar against the currencies of six major countries, is up 0.5% from the previous day at 96.06.
U.S. Treasury yields are also climbing. The yield on the 10-year U.S. Treasury, the global benchmark for bond yields, rose 4 basis points (1bp = 0.01 percentage point) from the previous day to 4.12%. The yield on the 2-year U.S. Treasury, which is sensitive to monetary policy, increased by 3 basis points to 3.57%.
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