The Fed lowered the rate to a range of 1.75% to 2%, and a plurality of Fed officials predicted at least one more cut by the end of the year. This is the second rate cut in two months, in part to shore up the U.S. economy from the slowing impact of the U.S.' tariff war with China. The vote by the Fed's Open Market Committee was 7-3, with Boston Fed President Eric Rosengreen and Kansas City Fed President Esther George preferring no rate cut at all, while St. Louis Fed chief James Bullard sought an even-bigger 50-basis point cut in rates.
Fed: No Cut In 2020
Looking forward, the Fed said there would likely be no rate cuts in 2020 and one in 2021 and 2022, though Fed officials often say such long-off projections are not intended to be hard forecasts.
The Dow Jones Industrial Average climbed 0.1%, while the tech-laden Nasdaq dipped 0.1%. The S&P 500 index, meanwhile, was flat. The small-cap Russell 2000 was the biggest loser, sliding 0.6%. Volume was slightly higher on major exchanges, according to preliminary data. NYSE turnover increased 0.2%, while Nasdaq rose 7%.
FedEx plummeted 12.9% after it said an economic slowdown and U.S.-China trade conflict hurt earnings during the quarter and slashed its earnings-per-share forecast for all of 2019 to $11 to $13 a share, way below analysts' consensus for $14.69 a share.
Cloud software creator Adobe dropped 1.8%, despite reporting a solid 18% EPS gain in its Q3. That better-than-expected EPS gain was offset by Adobe's warning that Q4 revenues would be soft, in part due to underperformance at its new marketing software unit.
Meanwhile, Roku fell 13.7% after Facebook (FB) and Comcast (CMCSA) announced new streaming packages that will compete directly with Roku's current offerings.
But the Fed's rate cut and economic news dominated investor attention on Wednesday.
The Fed's Other Move
The Fed paved the way for its rate cut early Wednesday by injecting funds into money markets, responding to heavy demand from banks. For the first time since the financial crisis, it poured $125 billion in reserves into the overnight repurchase agreement market.
Banks use that market for short-term funding. In recent days, however, rates have shot skyward to as high as 10% at times, prompting the Fed to act.
Despite the Fed-related market drop, new data out Wednesday showed the economy remained solid in late summer.
August housing starts jumped 12.3% from July, to 1.364 million from 1.215 million the month earlier, the Census Department reported. August's big gain was about 9% above expectations. Meanwhile, building permits jumped 7.8% to 1.419 million from 1.317 million. That, too, was bigger than expected, and a sign that recent Fed rate cuts are having the desired effect.
The big gain in starts came alongside a major drop in interest rates this summer, with the 10-year yield moving from about 2.5% in May to under 1.5% at the end of August.
Stock Market: Some Winners, Too
Audiocodes (AUDC), an Israeli-based VOIP and networking products company, rose 5.1%, following through on a recent breakout after a number of investment advisers raised ratings for the company. Audiocodes stock has a 99 Composite Rating, a 99 EPS Rating and a 98 RS Rating from IBD. It's ranked No. 1 in its group, and is now extended.
Boston Beer Company (SAM) tacked on 1.7%. After the beer company's big 9.3% drop on Tuesday, Wednesday's move put Boston Beer stock back above its 353.12 buy point out of a flat base.
Also, IBD Stock of the Day Proofpoint (PFPT) dipped 0.8% but remains just below a 128.98 buy point out of a cup with handle base.
Also on IBD's Stocks on the Move list, FactSet Research Systems (FDS) added 0.7%. With a 93 Composite Rating and ranked No. 3 in its industry group, the company has struggled in recent weeks to rise above its 50-day moving average, but in the past two days has passed that test. It's currently working to complete the right side of a flat base.
Meanwhile, among exchange traded funds, the Innovator IBD 50 ETF (FFTY) was flat as it struggles to regain its long-term 200-day line.
Please follow Jones on Twitter at @IBD_TJones for more on growth stocks, financial markets and the economy.
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