S&P 500 heads for record close, Dow rallies 500 points after Fed cuts rates: Live updates

The Dow Jones Industrial Average surged and the S&P 500 headed for a record close on Wednesday after the Federal Reserve decided to cut interest rates once again this year as traders bet more easing was ahead next year.

The blue-chip index traded up 587 points, or 1.2%. The broad-based S&P 500 jumped 0.8% to 6,898, above its prior high close notched at the end of October. The Nasdaq Composite increased 0.5%.

The Fed approved another quarter percentage point cut at the conclusion of its two-day policy meeting. The cut, which marks its third in a row, brings the federal funds rate to a range of 3.50%-3.75%.

There were a number of items Wall Street saw as bullish for equity markets in the Fed’s messaging, as well as in Chair Jerome Powell’s subsequent remarks:

• Notably, the Fed announced it start buying short-term bonds, expanding its balance sheet. Short-term Treasury yields moved lower as a result.
• The central bank also gave attention to the weak labor market in its statement, removing language that it “remained low.” This suggests its focus is turning to supporting the economy and away from inflation.
• While Powell said the Fed would have to “wait and see” before making its next move, he also virtually ruled out any chance for a rate hike next. “I don’t think that a rate hike … is anybody’s base case at this point,” he said.

On the flip side, the Fed forecasts only one rate cut in 2026, but traders bet they would go further. In fact, the CME Fedwatch tool showed fed funds futures pricing in a 68% chance the central bank would slash rates two or more times next year.

“A lack of deeper reductions could have been interpreted poorly by Wall Street, but news that the balance sheet will begin expanding again, albeit slowly, is certainly a reason to get excited and more than offset the concerns of limited benchmark trims ahead,” said José Torres, senior economist at Interactive Brokers. “Furthermore, the dots featured stronger growth forecasts, lighter inflation anticipations and neutral employment expectations, developments that are also supporting a bullish reaction in stocks and yields alike.”

On October 29, the day after the last record close for the S&P 500, the Fed cut rates, but Powell signaled that another reduction was not certain for December. That sent stocks lower that day and started a rough patch for equities through most of November until some Fed members began to signal a December cut may be in order.

The benchmark has since made a round trip back, culminating in Wednesday’s rally to a new record closing level.

“The last interest rate decision of 2025 has essentially paved the way for a Santa Claus rally to end the year and the S&P 500 is poised to exceed the 7,000 milestone in the next few weeks,” Torres said.