Federal Reserve cuts interest rates by half-point, stocks surge

The Federal Reserve cut interest rates on Wednesday for the first time since the COVID-19 pandemic.

Many observers of Fed activity had predicted a quarter-point reduction but the central bank wound up cutting rates by a half-point.

Immediately following the announcement, the Dow Jones Industrial Average jumped 220 points, or 0.5% and the S&P 500 increased 0.6% while the Nasdaq Composite added 0.9%, according to CNBC. 

The Fed had approved a series of rate hikes starting in early 2022 as a way to combat rising inflation. 

The Fed has a meeting on Nov. 7, just two days before the 2024 presidential election, where another rate cut will be considered.

Brian Belski, chief investment strategist with BMO Capital Markets, predicted that the rate cut will help "growth stocks," particularly in technology, CNBC reported.

“In this context, we believe equity gains will broaden, with continued potential for growth stocks, particularly in the technology sector, to rise further,” Belski said on Wednesday. “In addition, while Fed rate cuts in non-recessionary periods have historically been favorable for equities overall, they also make growth stocks more attractive, as lower rates increase the present value of these companies’ future cash flows.”