US STOCKS-S&P 500 gains ground after Fed cuts interest rates

Updates prices to late afternoon

By Sinéad Carew and Johann M Cherian

Dec 10 (Reuters) - The S&P 500 gained ground on Wednesday after the Federal Reserve cut interest rates by a quarter percentage point and signaled that it will likely pause further reductions in borrowing costs in line with expectations.

The cut was the result of a divided vote and the central bank said that it would look ahead for clearer signals about the direction of the job market and inflation that "remains somewhat elevated."

However, projections after the Fed's two-day meeting showed median expectations for another one quarter-percentage-point cut in 2026 were in line with expectations in September.

And policymakers raised their expectations for 2026 GDP growth to 2.3% from 1.8% in September and maintained an estimate for unemployment at the end of next year at 4.4%.

The projections and the lack of an overly hawkish tone from the statement appeared to draw investors into the equity market.

"When the Fed is cutting rates and the economy is not headed into an imminent downturn or recession, markets tend to like that backdrop," said Mona Mahajan, head of investment strategy at Edward Jones in New York.

At 2:22 p.m. the Dow Jones Industrial Average .DJI rose 291.17 points, or 0.61%, to 47,851.46, the S&P 500 .SPX gained 18.32 points, or 0.27%, to 6,858.83 and the Nasdaq Composite .IXIC lost 14.20 points, or 0.06%, to 23,562.29.

The market had been muted ahead of the statement as investors, while widely expecting a cut, were concerned that the Fed would take a more hawkish tone on the policy outlook.

Traders will monitor Fed Chair Jerome Powell's press conference for clues on his expectations for the next meetings as the central bank battles still-elevated inflation alongside some weakening labor market signals.

After the statement, traders were pricing in a 78% chance the Fed would hold rates steady in January, according to the latest data from LSEG.

Among the S&P 500's 11 major industry sectors most were advancing. Technology .SPLRCT and communications services .SPLRCL were the biggest losers. Industrials .SPLRCI was the biggest gainer.

In individual stocks, energy equipment manufacturer GE Vernova <GEV.N> surged more than 15% after forecasting higher revenue in 2026, signaling strong demand for its AI-related infrastructure.

Advancing issues outnumbered decliners by a 1.97-to-1 ratio on the NYSE where there were 214 new highs and 40 new lows. On the Nasdaq, 2,851 stocks rose and 1,788 fell as advancing issues outnumbered decliners by a 1.59-to-1 ratio.

The S&P 500 posted 32 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 126 new highs and 69 new lows.

(Reporting by Sinéad Carew in New York, Johann M Cherian and Pranav Kashyap in Bengaluru; Editing by Tasim Zahid, Shinjini Ganguli and David Gregorio)

((sinead.carew@thomsonreuters.com))