Dow Jones Closes at Fresh Record After Fed-Fueled Winning Week

US Federal Reserve chairman Jerome Powell holds a press conference in Washington, DC, on September 18, 2024. Mandel NGAN / AFP

U.S. stocks ended the Sept. 20 session mixed but registered notable gains for the week, fueled by the Federal Reserve initiating the easing cycle with a significant interest rate cut.

The blue-chip Dow Jones Industrial Average picked up 38.17 points, or 0.09 percent, to close the Sept. 20 trading session at 42,063.36, a new all-time high. The 30-stock index posted a weekly boost of 1.62 percent, lifting its year-to-date gain to nearly 12 percent.

The tech-heavy Nasdaq Composite Index slipped 65.66 points, or 0.36 percent, to 17,948.32. The Nasdaq enjoyed a weekly gain of 1.49 percent and has rallied close to 20 percent this year.

The S&P 500 dipped 11.09 points, or 0.19 percent, to 5,702.55. It posted a weekly jump of 1.36 percent and has climbed about 20 percent in 2024.

Stocks reacted favorably to the Fed cutting interest rates for the first time since March 2022.

Officials followed through with a super-sized half-point reduction to the benchmark federal funds rate at the highly anticipated September policy meeting, lowering it to a range of 4.75 and 5.00 percent.

Nikhil Choraria, the head of European Flow Rates Trading at Goldman Sachs, wrote in a note to clients that the Fed’s strong start right out of the gate “is a clear statement of intent that the Fed does not want to be behind the curve.”

While Fed Chair Jerome Powell told reporters at the post-meeting press conference on Sept. 18 that he does not think the institution is behind, the sizable rate cut is “a sign of our commitment not to get behind.”

As economic observers debate the rationale for a 50-basis-point rate cut, the markets liked it, said Jamie Cox, the managing partner for Harris Financial Group.

“Markets like rate cuts, especially big ones when the economy is strong,” Cox said in a note. “The Federal Reserve made its presence known in protecting the labor market before it weakens further.”

Indeed, Powell stated that the monetary authorities will concentrate on the other side of its dual mandate: Maximum employment.

“You now have a cooler labor market, in part because of our activity. So, what that tells you is it’s time to change our stance. So we did that,” Powell told reporters. “The sense of the change in the stance is that we’re recalibrating our policy over time to a stance that will be more neutral.”

While the decision overwhelmingly favored a 50-basis-point cut, Fed Gov. Michelle Bowman was the lone dissenter. She wanted to start the cycle with a modest quarter-point rate cut.

“Although it is important to recognize that there has been meaningful progress on lowering inflation, while core inflation remains around or above 2.5 percent, I see the risk that the Committee’s larger policy action could be interpreted as a premature declaration of victory on our price stability mandate,” Bowman said in a statement on Sept 20.

Looking ahead, according to the Summary of Economic Projections, Fed officials forecast 50 basis points of further cuts by the year’s end, following 100 basis points of cuts next year. In 2026, the central bank intends to lower interest rates by another 50 basis points, bringing the median policy rate to 2.9 percent.

Constellation Energy, FedEx Capture Attention

Nuclear energy operator Constellation Energy was a big winner to close out the trading week after the company announced a new agreement with Microsoft.

The company plans to reopen the Three Mile Island facility in Pennsylvania as the tech titan plans to buy 20 years’ worth of power from Constellation beginning in 2028. The Nuclear Regulatory Commission must still review and approve the decision before the plant reactor can be restarted.

In 1979, the Three Mile Island facility experienced a partial nuclear meltdown on its Unit 2 reactor, suffering the worst accident in the nation’s history of commercial nuclear generation. The plant shuttered its Unit 1 reactor in 2019 due to declining revenues. The agreement with Microsoft is to restore Unit 1.

“Before it was prematurely shuttered due to poor economics, this plant was among the safest and most reliable nuclear plants on the grid, and we look forward to bringing it back with a new name and a renewed mission to serve as an economic engine for Pennsylvania,” said Constellation CEO Joe Dominguez in a statement.

Constellation shares surged more than 22 percent to end the day just below $255.

FedEx suffered its worst single-session performance in two years after earnings fell short of Wall Street expectations.

A pedestrian walks by a parked FedEx delivery truck in San Francisco, Calif., on March 21, 2024. Justin Sullivan/Getty Images

The transportation stock slumped more than 15 percent, sliding below $255, after the company reported first-quarter earnings of $3.6 per share on $21.58 billion in revenues. The consensus estimate was $4.76 in earnings per share on $21.93 billion in revenues.

The last time FedEx shares suffered a sizable loss was in September 2022, when the stock tanked more than 21 percent.

Gold Glitters

Gold broke past the $2,600 barrier and registered a fresh record high.

December gold futures, the most active contract, advanced $32.50, or 1.24 percent, to $2,647.10 per ounce on the COMEX division of the New York Mercantile Exchange. Gold posted a weekly gain of 1.57 percent, boosting its year-to-date rally to 28 percent.

The yellow metal added to its gains on the Fed policy shift.

Gold typically benefits in a falling-rate economic climate because it diminishes the opportunity cost of holding non-yielding bullion.

Weakness in the U.S. dollar and dollar-related assets further supported the precious metal.

Treasury yields were mostly in the red, with the benchmark 10-year yield little changed at 3.73 percent.

The U.S. Dollar Index (DXY), a gauge of the greenback against a basket of currencies, rose 0.12 percent to 100.74 but posted a weekly loss of 0.37 percent. Year-to-date, the index is down 0.6 percent.

A lower buck is usually positive for gold prices because it makes it cheaper for foreign investors to purchase.

ING recently adjusted its gold forecast for 2025, projecting an average price of $2,700 an ounce.

Ewa Manthey, the bank’s commodities strategist, cited the Fed’s long-awaited rate cut, the November election, geopolitical tensions, and central bank demand as factors for gold’s rise.

“We now see gold averaging $2,580 in the fourth quarter, resulting in an annual average of $2,388,” Manthey said in a note. “Gold’s upward momentum will continue next year with 2025 prices averaging $2,700.”