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Investors’ giddy reaction turned slightly negative to the hotly anticipated Federal Reserve decision to lower interest rates by 50 basis points Wednesday, as the central bank opted for the more stock-friendly route to kick off its rate cutting cycle.

The Dow closed at a record high on Friday. Investors see more gains ahead as the Fed kicks off a new cycle of easing interest rates.

The decision by the Fed's policy-setting committee to cut interest rates for the first time since March 2020 was prefaced by an unusual amount of market uncertainty as to how much the central bank would lower its benchmark rate from a two-decade high of 5.25% to 5.5%, where it has stood since July 2023.

The Federal Reserve just cut rates for the first time since early 2020, and it could be a big catalyst for small-cap stocks.

They just got quite the shot in the arm they needed.The Russell 2000 index of small-market-value companies has gained 2.2% on Thursday, just one day after the Federal Reserve announced on Wednesday that it was cutting the ultrashort term federal-funds rate by half a percentage point and suggested more cuts were on their way.