Editor’s note: This story has been updated with additional information.

Markets rebounded Wednesday afternoon after the Federal Reserve decided to cut interest rates by 0.5%, marking the start of the central bank’s long-awaited rate-cutting cycle.

What you need to know: Wednesday’s 0.5% rate cut brings the federal funds rate target to a new range of between 4.75% and 5%, down from a 23-year high of 5.25% to 5.5%. It’s also the first rate cut since March 2020.

The federal funds rate has been hovering between 5.25% and 5.5% since the central bank last raised it in July 2023.

The SPDR S&P 500 (NYSE:SPY), which tracks the S&P 500 index, was up 0.44% at last check to a record high, led by a number of names including Arm Holdings Plc (NASDAQ:ARM), The Trading Desk Inc. (NASDAQ:TTD) Toyota Motor Corp (NYSE:TM), General Motors Co (NYSE:GM) and Marriott International (NASDAQ:MAR).

The materials sector, as tracked by the Materials Select Sector SPDR Fund (NYSE:XLB) showed the most strength at the time of writing, rising about 0.6% following the Fed’s decision. The energy sector, followed by the Energy Select Sector SPDR Fund (NYSE:XLE), was the weakest, down 0.3% after the rate cut. Energy stocks performed well Wednesday ahead of the Fed’s decision, which may explain some of the relative weakness in midday trading.

Here’s how several ETFs tracking the price-weighted Dow Jones Industrial Average, technology stocks, small caps, Treasuries and gold are doing after the Fed’s latest move.

It is also worth noting that crypto markets are volatile following the Fed’s rate decision. Bitcoin (CRYPTO: BTC) fell 0.86% over the 24-hour period to trade at $60,480, but was still well below the day’s lows. Ethereum (CRYPTO:ETH) fell 1.79% to $2,322.

Check this out: Federal Reserve delivers bold 0.5% rate cut, signals further easing

The increased volatility is likely a result of uncertainty ahead of the meeting. According to CME’s FedWatch tool, the market was predicting a 61% chance of a larger rate cut of 0.5% ahead of the meeting, versus a 39% chance of a smaller cut of 0.25%.

The story continues

As reported by Benzinga, the updated quarterly Dot Plot, which helps signal the Fed’s future policy intentions, shows a more aggressive path for rate cuts than previously projected following Wednesday’s 0.5% cut. The median projection now calls for a total of 1% rate cuts in 2024.

SPY Price Action: At the time of publication, the SPDR S&P 500 was up 0.44% to $565.62, according to Benzinga Pro.

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Watch Fed Chairman Jerome Powell‘s press conference here:

This illustration was generated using artificial intelligence via Midjourney.

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This article S&P 500, Gold Hit Record Highs, Small Caps Rise After Fed Cuts Rates for First Time in 4 Years (UPDATED) originally appeared on Benzinga.com

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