Fed Rate Cut Sparks Rally, Lifting Dow by Nearly 500 Points

The Federal Reserve cut interest rates by a quarter point on Wednesday, but signaled it may pause before easing again as policymakers split over whether inflation or a cooling labor market poses the greater risk.

The decision passed 9–3 — the first meeting in six years with three dissents. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid opposed any cut, while Governor Stephen Miran argued for a larger half-point move.

Markets rallied after Fed Chair Jerome Powell struck a slightly more dovish tone in his press conference, highlighting rising concerns about labor-market weakness and noting “significant downside risks.” The Dow jumped 1% (497 points), the S&P 500 climbed 0.7% to just below a record, and the Nasdaq added 0.3%. Treasury yields fell to 4.163%.

Powell’s remarks reassured investors who had grown doubtful about the pace of rate cuts next year, particularly after cautious comments from Kevin Hassett, widely viewed as the frontrunner to succeed Powell in May. The Fed’s updated “dot plot” showed six of 19 officials projecting rates at year-end above pre-cut levels — suggesting hesitation among voters or opposition from nonvoting members.

Economically sensitive stocks surged. The small-cap Russell 2000 gained 1.3% to a fresh all-time high, and the Dow Jones Transportation Average jumped 2.7%.

After the close, Oracle reported earnings slightly below expectations, as the company’s debt-heavy spending push has positioned it as a proxy for AI-related investment. Meanwhile, co-founder Larry Ellison is backing his son, Paramount CEO David Ellison, in a hostile bid for Warner Bros. Discovery.

In commodities, silver futures continued their record-breaking run, settling at $60.37 an ounce.