US stocks and shorter-term Treasuries weaken after Fed cuts rates

US producer prices climb more than expected in June

US stocks and shorter-term Treasuries weakened after the Federal Reserve pushed ahead with its first interest rate cut since the financial crisis.

The S&P 500 turned negative after the Federal Reserve came trimmed the benchmark borrowing rate by 25 basis points – a move widely expected by investors and economists – and also signalled it was prepared to ease monetary policy further if necessary.

In the wake of the decision, the equities benchmark was flat and roughly where it had been in the lead-up to the central bank’s announcement.

Shorter-term Treasuries reversed a rally that took hold earlier in today’s session, with yields on briefly turning higher. The yield on the policy-sensitive two-year Treasury was down 0.8 basis points at 1.842 per cent after a brief foray into positive territory after the announcement. The yield hovered around 1.814 per cent just before 2pm ET.

The yield on the benchmark 10-year Treasury, though, extended a rally that had been in tow in the lead-up to the rates announcement. The yield was down 4.7 basis points at 2.0144 per cent, having been at 2.03 per cent before the rate cut.

The US dollar, which had been relatively flat for most of Wednesday’s session, immediately jumped to its highest level since late May. The dollar index, which tracks the greenback against a basket of peers, rose as much as 0.2 per cent to 98.261.

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