Violent rate cuts + dovish rate cuts, gold price broke above 2600 but then gave back all gains, how does Wall Street view this?

After the Federal Reserve cut interest rates by 50 basis points for the first time in four years, traders have increased their bets on further easing by the Fed. "This is not just a 50 basis point rate cut, this is a dovish 50 basis point rate cut," said Mohamed El-Erian, columnist for Bloomberg Opinion and President of Queens' College, Cambridge University. "My question is, what has changed since July when they decided not to cut rates, and now we are seeing this very aggressive rate cut and signal."

Here are the views of others on Wall Street:

Phil Mesman, Portfolio Manager at Picton Mahoney Asset Management:

"Given that inflation risks have receded, a 50 basis point rate cut is a reasonable precaution against further deterioration in the labor market. Furthermore, as inflation risks seem manageable, the rate cut is not an overly aggressive first step."

Nathan Thooft, Senior Portfolio Manager at Manulife Investment Management:

"The dot plot does not imply more 50 basis point moves, which further confirms the notion that this is just a start, it is proactive, not a trend of more 50 basis point rate cuts and worrying economic trends. This may also indicate that they regret not starting with a 25 basis point rate cut at the last meeting."

Keith Lerner, Chief Market Strategist at Truist Financial:

"We still view this as a market-friendly rate cut, and we would not be surprised if the stock market rallies after investors digest this news. We believe the Fed's rate cut this time is more about getting away from very restrictive levels and inflation is moving towards the target, so the Fed's move is the right one."

Paresh Upadhyaya, Director of Fixed Income and Currency Strategy at Amundi:

"The market pushed the Fed to cut rates by 50 basis points. While the market may be eager to digest the high probability of another 50 basis point rate cut, the change in the statement suggests that the Fed still relies on data and may be just as likely to pivot to a 25 basis point rate cut."

Cameron Dawson, Chief Information Officer at NewEdge Wealth:

"The Fed's support and signs of continued economic growth in the U.S. have buoyed the stock market. This is a favorable backdrop for the broad equity market, including cyclical industries benefiting from stronger growth, and rate-sensitive industries benefiting from a lower yield environment."

Chris Murphy, Co-Head of Derivatives Strategy at Susquehanna International Group:

"Materials and cyclical stocks lead, defensive stocks underperform. I expect this trend to continue, with defensive sectors lagging and cyclical sectors leading." Natixis Advisors LLC Portfolio Strategist Garrett Melson:

"Given how tight real rates are and that we are already in a restrictive area, front-loading easing to get back to neutral faster makes sense. A 50 basis point rate cut would send a loud and clear message, and I believe that signal is key for the market. Powell's policy is favorable for the labor market, which will ultimately support risk appetite."

Interactive Brokers Chief Strategist Steve Sosnick:

"The stock market is getting what it wants, at least for now. What I find interesting is that 'risk balance' is used twice in the third paragraph, so we may want to learn more about relative balance, but the statement is overall dovish. The question now is, how much of the market's seven-day rally has already been priced in?"

Monex Group Forex Trader Helen Given:

"The yen is clearly the big winner in all of this, as interest rate differentials have now significantly narrowed. The dot plot tells a bigger story. The Fed's view on the extent of easing this year still falls short of what traders expect, which is why we see the initial decline in the dollar being contained."

Roundhill Investments CEO Dave Mazza:

"The FOMC's 50 basis point rate cut aligns with recent expectations. This rate cut acknowledges the Fed's concerns about the employment situation, which should be a positive sign for risk sentiment in the short term. While this move is clearly dovish, investors will closely watch Powell's remarks at the press conference to gauge the extent of this dovishness, especially considering the slight improvement in inflation but the job is far from done."

Charles Schwab Senior Investment Strategist Kevin Gordon:

"The most important part is the changes in the statement, showing how much attention is now on the labor market. It is clear that Fed members see greater downside risks to employment growth, but they also know they have plenty of room to dial back restrictive policies."

Market Reaction:

Influenced by the FOMC statement and economic forecast summary, U.S. stocks surged at one point, with small-cap stocks rising nearly 2.5% at highs, and the S&P 500 briefly hitting a new all-time high. However, after Powell began speaking, all major indices retreated and closed lower. Powell warned against assuming that significant rate cuts will continue.

The U.S. dollar index plummeted after the FOMC statement was released, but rebounded steadily after Powell's speech.

Before Powell's speech, gold once rose to a historical high of $2600, then fell back to touch $2550 per ounce, a $50 drop from the daily high, completely giving back the gains since the Fed's rate decision announcement.

US Treasury yields fell across the board after the FOMC statement, and rebounded after Powell's speech. The 2-year Treasury yield remained flat for the day, while the long-end Treasury yield rose by 7 basis points!

Bitcoin briefly broke through $61,000 during the session, then returned to flat for the day.