Wall Street Lunch: Powell Plays The Grinch (undefined:US10Y)

Core Viewpoint - The Federal Reserve cut interest rates by 25 basis points for the second time this year, but Chairman Jay Powell indicated that another cut in December is not guaranteed, leading to mixed market reactions [2][3][4]. Federal Reserve Actions - The Fed lowered the fed funds rate target to a range of 3.75% to 4%, marking the first time it has been below 4% since late 2022 [4]. - The Fed announced the end of its balance sheet runoff, concluding reductions in Treasury and agency securities on December 1 [5]. Market Reactions - Following Powell's comments, the odds of the Fed maintaining rates steady in December surged to 40% from below 10%, while the odds of a cut decreased to 55% and a 5% chance of a rate hike emerged [4]. - The S&P 500 finished flat, the Nasdaq rose by 0.6%, and the Dow fell by 0.2% after initial declines [6]. - Treasury yields increased, with the 2-year yield rising by 11 basis points to 3.61% and the 10-year yield increasing by 9 basis points to 4.07% [6]. Economic Outlook - The Fed described economic growth as "expanding at a moderate pace," a shift from previous language emphasizing moderation, while acknowledging slowed job gains and rising inflation [5]. - Powell noted that there are differing views within the Committee regarding future economic conditions, suggesting a cautious approach moving forward [3].