Russell 2000 moderates as rates fall
The Russell 2000 (NYSE: IWM) and the Dow eased off their session highs following news that the U.S. Federal Reserve has cut its target interest rate. At 2:32 p.m. ET, the small-cap index had added 9.12 points, or 1.40%, to 659.60. The Dow Jones Industrial Average (INDU) was up 125.38 points, or 1.05%, to 12,097.63.
The U.S. Federal Reserve decided to lower its target interest rate 0.75% to 2.25%, the central bank announced at 2:15 p.m. ET. The market had priced a full 1% of the federal funds rate, the rate at which commercial banks make overnight loans to each other.
The Russell 2000, which was up nearly 3% moments before the decision was announced, immediately trimmed its gains.
“Recent information indicates that the outlook for economic activity has weakened further,” the Fed said in a statement. “Growth in consumer spending has slowed and labor markets have softened.”
However, policymakers also showed concern about inflation.
“Inflation has been elevated, and some indicators of inflation expectations have risen,” the statement reads.
The U.S. Labor Department reported before the opening that producer prices, the selling prices received by domestic producers for their output, climbed an expected 0.3% in February. However, core producer prices, which exclude the costs of food and energy, rose 0.5%, above the projected 0.4%.
