SPY, QQQ Surge as ETFs Rally on Fed Rate Cut

Stock ETFs leaped a day after the Federal Reserve's first interest rate cut in four years, with riskier portions of the market such as tech and crypto among the first to reap the benefits of lower rates.

The Fed trimmed half a percentage point from the federal funds rate yesterday, pushing it to 4.75% to 5%. Stock markets closed lower after the announcement.

The cut appeared targeted toward a softening jobs market while at the same time heading off what some experts see as a looming recession. The reduction followed a cycle of 11 rate increases beginning in early 2022 that were initiated to head off inflation that surged to a 40-year high.  

The VanEck Semiconductor ETF (SMH), which invests 21% of its assets in Nvidia stock, surged 4.7% before noon. It remains $40 below its all-time high after a 14% drop over the past three months. The Invesco QQQ Trust (QQQ), a proxy for the tech sector since it tracks the Nasdaq stock index, jumped 2.8%.

Also in line with the theme of risky assets surging, crypto exchange-traded funds are having their best day in weeks. The iShares Bitcoin Trust (IBIT) leaped 5.4%, as the underlying price of the asset jumped more than 6% over the past day. The Bitwise Ethereum ETF (ETHW) gained 5.2%.
IBIT (upper line) vs. ETHW