Fed Cuts Rate, Markets Slightly Bearish Initially

Initial reactions to the Fed's cut of 25 basis points on the federal funds rate announced Wednesday afternoon were unusually bearish.

Not only did stocks sell off - only to be rescued by mysterious bids in the final hou of trading - but so too crude oil, gold, silver. Bonds languished, with the 10-year note down a single basis point to 1.81% yield, though shorter maturities sold off, the two-year note gaining five basis points, from 1.72 to 1.77%, threatening to invert with the 10-year again.

One-month bills reacted naturally, with yields dropping from 2.10% on Tuesday to 1.96% on Wednesday's close.

Rumors of the Fed announcing a restart of QE were dismissed. The federal funds rate was lowered to 1.75-2.00%.

The vote was seven for the cut and three against. Voting against the action were James Bullard, who preferred at this meeting to lower the target range for the federal funds rate to 1.50 to 1.75 percent, a 50 basis point drop; and Esther L. George and Eric S. Rosengren, who preferred to maintain the target range at 2.00% percent to 2.25 percent.

The FOMC's penultimate meeting for 2019 is scheduled for October 29-30.

Considering the volatility in bonds and the unusual repo auctions held the past two days, market reaction was rather muted and refined overall. No panic was seen, though some degree of caution was notable.

At the Close, Wednesday, September 18, 2019:
Dow Jones Industrial Average: 27,147.08, +36.28 (+0.13%)
NASDAQ: 8,177.39, -8.63, (-0.11%)
S&P 500: 3,006.73, +1.03 (+0.03%)
NYSE Composite: 13,119.31, -12.09 (-0.09%)