S&P 500 Hits New High as Traders Welcome Latest Fed Rate Cut

Stocks closed broadly higher on Wall Street Wednesday, sending the S&P 500 to a record high for the second time this week, as investors welcomed the Federal Reserve’s decision to lower interest rates for the third time this year.

The central bank also indicated that it won’t cut rates again in the coming months unless the economic outlook worsens. The Fed has been using its power to cut short-term interest rates in a bid to shore up the economy amid the costly impact from the U.S.-China trade war. With its latest rate cut, the Fed has nearly reversed the four rate hikes that it made in 2018.

Stocks wobbled shortly after the Fed’s midafternoon announcement, which had been widely anticipated by traders. The market then rallied into the close, led by gains in technology and health care stocks. Bond yields fell.

“The rate cut was expected and also the market had been expecting a change in the language regarding another rate cut this year,” said Quincy Krosby, chief market strategist at Prudential Financial. “The Fed just basically upped the bar for another rate cut by suggesting that the economy is in a good place.”

The S&P 500 index rose 9.88 points, or 0.3%, to 3,046.77. The benchmark index also hit record high on Monday.

The Dow Jones Industrial Average gained 115.27, or 0.4%, to 27,186.69. The Nasdaq composite added 27.12 points, or 0.3%, to 8,303.98.

The Russell 2000 index of smaller company stocks fell 4.23 points, or 0.3%, to 1,572.85.

Major stock indexes in Europe closed mostly higher.

The central bank’s latest move reduces the short-term rate it controls — which influences many consumer and business loan rates — to a range between 1.5% and 1.75%.

Lower rates are intended to encourage more borrowing and spending. Rising global risks have led the Fed to change course after hiking rates four times last year.

The central bank’s rate reductions are intended as a kind of insurance against threats to the economy, which is in its 11th year of expansion, fueled by consumer spending and a solid if slightly weakened job market.

On Wednesday, the Commerce Department said the U.S. economy slowed to a modest growth rate of 1.9% in the July-September quarter. That surpassed economists’ forecasts for even weaker growth, however.

The report indicated that consumer spending downshifted and businesses continued to trim their investments in response to trade war uncertainty and a weakening global economy.

Technology and health care companies drove much of the market’s broad gains Wednesday. Microsoft rose 1.3%, while Johnson & Johnson climbed 2.9%.

Energy stocks took the heaviest losses. Chevron slid 1.5% and Helmerich & Payne fell 4.3%. The sector dropped 2.1%, lowering its gains for the year to just 1.1%. That’s the smallest gain of all the sectors in the S&P 500.

Several big banks helped pull financial sector stocks lower as bond yields declined. The yield on the 10-year Treasury note dropped to 1.77% from 1.83% late Tuesday. The yield is a benchmark for interest rates that bank charge for mortgages and other loans. JPMorgan dropped 0.6% and Bank of America slid 1.4%.

Investors continued to focus on a steady flow of corporate earnings.

Apple, Facebook and Lyft climbed in after-hours trading after reporting quarterly results that topped Wall Street’s forecasts. Twitter slumped after the social media company announced it is banning political ads from its service.

General Electric jumped 11.5% after the industrial conglomerate raised its projections for a key measure of profitability despite a damaging trade fight and ongoing problems with Boeing’s 737 Max, which GE helps make engines for.

Benchmark crude oil fell 48 cents to settle at $55.06 a barrel. Brent crude oil, the international standard, dropped 98 cents to close at $60.61 a barrel.