As expected, the Federal Reserve yesterday cut its benchmark interest rate by a quarter percentage point. But the stock the market didn't react well, apparently because Fed chair Jerome Powell refrained from suggesting further rate cuts were on the way.
Following the announcement, the Dow Jones Industrial Average closed down 1.2 percent, marking its biggest one-day fall since May 31. The S&P 500 dropped 1.1 percent.
On the other hand, history shows the market usually responds more positively to a rate cut. Since 1990, the S&P 500 has gained on average 0.16 percent on the day of a 25-basis-point cut. One month later, the S&P is an average of 0.57 percent higher.
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