Stocks rise, yields and dollar fall after Fed cuts interest rates?

By Caroline Valetkevitch

NEW YORK, Dec 10 (Reuters) - Major stock indexes jumped while U.S. Treasury yields declined on Wednesday after the Federal Reserve cut interest rates as expected and investors remained hopeful about further cuts ahead, even as the central bank signaled?it will likely pause reductions for now.

The U.S. dollar was lower against major currencies.

The U.S. central bank cut rates by a quarter percentage point, and projections issued after its two-day meeting showed the median policymaker sees just one quarter-percentage-point cut in 2026, the same outlook as in September.?

In his press conference after the announcement, Fed Chair Jerome Powell declined to provide guidance on whether another interest rate cut lies in the near future. However, he said the U.S. labor market has significant downside risks and the central bank does not want its policy to push down on job creation.?

Stocks gained while Treasury yields lost ground following Powell's comments.

"Today's rate cut was music to both the bond market and the stock market's ears," said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma.

"The guidance for possibly one cut in 2026 is better than many dire predictions of no cuts in 2026, so there's a lot of good news to parse through here for investors."

Weakness in the job market seemed to be more of a concern at this point than sticky inflation, Dollarhide said, adding there were "tremendous fears the bond vigilantes were going to hijack this bull market rally."

The Dow Jones Industrial Average rose 497.46 points, or 1.05%, to 48,057.75, the S&P 500 rose 46.17 points, or 0.67%, to 6,886.68 and the Nasdaq Composite rose 77.67 points, or 0.33%, to 23,654.16.

Seasonally, December is one of the months of weaker performance for the S&P 500, except for the final two weeks when stocks tend to rise into year-end, known as the Santa rally, as investors square their books for the year.

MSCI's gauge of stocks across the globe rose 5.30 points, or 0.53%, to 1,011.74. Earlier, the pan-European STOXX 600 index ended 0.07% higher.

The market has priced in a 78% chance the Fed will hold rates steady next month, compared with a 70% probability just before the rate cut announcement.

Even though the rate forecast from the Fed was for one rate decline next year, the rate futures market still priced in two cuts in 2026. The Fed's decision to cut by 25 basis points drew three dissents.

Complicating matters for policymakers is the lack of data due to the recent long U.S. government shutdown, which will delay November?payrolls report?to December 16, while inflation figures are due after that.

The yield on the benchmark U.S. 10-year Treasury note fell 4.3 basis points to 4.143% after swinging between a session low of 4.137% and a three-month high of 4.209%. The 10-year yield was poised to snap a four-session streak of gains, its longest run of gains in five weeks.

Yields around the globe have been climbing in recent weeks, as many central banks signaled they are either at or near the end of their own easing cycles, while the Bank of Japan is widely anticipated to hike rates at its policy meeting next week.

The U.S. dollar fell against major peers including the euro, Swiss franc, and Japanese yen. The greenback was further weighed down by Powell's comments that the U.S. central bank's next move is unlikely to be a rate hike.

In late afternoon trading, the dollar was down 0.8% against the Swiss franc to 0.8000 franc and was last down 0.6% at 155.92 against the Japanese yen.

The euro last changed hands at $1.1691, up 0.6%, while the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, slid 0.6% to 98.66.

Gold prices reversed course to rise after the Fed's rate cut. Spot silver rose to a record peak of $61.85, with prices up 113% so far this year.

In the energy market, oil prices rose after officials said the U.S. seized an oil tanker off the coast of Venezuela.

Brent crude futures rose 27 cents, or 0.4%, to settle at $62.21 a barrel, while U.S. West Texas Intermediate crude futures gained 21 cents, or 0.4%, to close at $58.46 per barrel.

(Reporting by Caroline Valetkevitch; additional reporting by Amanda Cooper and Wayne Cole in Sydney; Editing by Mark Potter, Matthew Lewis and Nia Williams)