Stocks ended higher on Wednesday after the Federal Reserve cut interest rates by a quarter percentage point as expected and investors bet on further easing down the road, even as the central bank signaled that it will put further cuts on pause for now. Canada’s main index closed at a fresh record high, tracking the advance on Wall Street.
The U.S. central bank said that before its next policy change it would look ahead for clearer signals about the direction of the job market and inflation that “remains somewhat elevated.” But projections after the Fed’s two-day meeting showed median expectations for another quarter-point cut in 2026, in line with expectations at the September meeting.
And policymakers raised estimates for 2026 GDP growth to 2.3% from 1.8% and maintained expectations for a 4.4% unemployment rate at the end of next year. In his press conference Fed Chair Jerome Powell declined to provide guidance on whether there will be another rate cut in the near future. However, investors garnered some hope for easing from his comments that the labour market has significant downside risks and that the central bank doesn’t want its policy to push down on job creation.
“The market may have found some solace in Powell’s downbeat labour market discussion - a bad news is good news situation, to support more cuts next year,” said Lindsey Bell, chief investment strategist at 248 Ventures in Charlotte, North Carolina, adding that U.S. Treasury yields “lost some steam as Powell spoke, which helps support stock upside.”
The market had been muted ahead of the statement as investors, while widely expecting a cut, were concerned the Fed would take a more hawkish tone on the policy outlook. And even before Powell’s comments some investors were eyeing more potential for rate cuts due to labor market concerns.
“The statement emphasized weakness in the labour market as the principal rationale for the 25 basis point cut, and this detail is what the market has picked up on, suggesting the Fed could continue easing policy, even though the expectations for easing in 2026 haven’t changed with one 25 basis point priced in,” said Michael Rosen, chief investment officer, Angeles Investments.
The S&P 500 closed up 46.17 points, or 0.67%, at 6,886.68, eyeing a return to its October 28 record closing high but ultimately falling short at the end of trading.
The Dow Jones Industrial Average rose 497.46 points, or 1.05%, to 48,057.75 while the Nasdaq Composite gained 77.67 points, or 0.33%, to 23,654.16.
The S&P/TSX Composite ended up 246.48 points, or 0.8%, at 31,490.85, eclipsing the record closing high it posted last Thursday.
The Bank of Canada held its benchmark interest rate steady at 2.25% as widely expected. Governor Tiff Macklem said the economy was proving resilient overall to the effect of U.S. trade measures.
Expectations that the BoC would begin hiking interest rates in 2026 were dialed back modestly after the rate decision. They had climbed following stronger-than-expected jobs data on Friday. Overall, market reaction to the Bank of Canada decision and commentary was minimal.
Heavily weighted TSX financials added 1.1%, with Toronto-Dominion Bank shares up nearly 2%. Shares of e-commerce company Shopify Inc were up 4.8%, which helped lift the technology sector to a gain of 1.6%.
The materials group , which includes metal mining shares, gained 1.1% as gold copper prices moved higher.
Just two of 10 major sectors ended lower, with consumer staples losing 0.4% and utilities 0.6% lower.
Canadian bond yields moved lower across the curve, tracking moves in U.S. Treasuries. The Canada 10-year was down 4.4 basis points at 3.428%.
In the U.S., the rate-sensitive small cap Russell 2000 index outperformed large caps with a 1.3% gain for a record closing high. Among the S&P 500’s 11 major industry sectors, all but two showed gains. Industrials made the biggest advance, ending up 1.8%. Its biggest boost was from energy equipment manufacturer GE Vernova, which surged 15.6% after forecasting higher revenue in 2026, signaling strong demand for its AI-related infrastructure.
On the other side of the spectrum, defensive utilities was the biggest laggard, falling just 0.1% while consumer staples was barely lower.
Advancing issues outnumbered decliners by a 2.86-to-1 ratio on the NYSE where there were 496 new highs and 51 new lows. On the Nasdaq, 3,164 stocks rose and 1,642 fell as advancing issues outnumbered decliners by a 1.93-to-1 ratio. The S&P 500 posted 45 new 52-week highs and seven new lows while the Nasdaq Composite recorded 185 new highs and 77 new lows.
On U.S. exchanges 16.91 billion shares changed hands compared with the 17.41 billion moving average for the last 20 sessions.
Reuters, Globe staff