The biggest gains, however, tend to come after the Fed begins cutting rates following a stock market panic. Following the first Fed rate cut in March 2020 due to the COVID pandemic, the S&P 500 was up over 27% in the next 12 months. Meanwhile, following the rate cut after the Sept. 11, 2001, market crash, the S&P was nearly 21% higher a year later.

The Federal Reserve's closely followed overnight reverse-repo facility already has begun to reflect Wednesday's big interest-rate cut. Wall Street firms rushed to park extra cash overnight at the facility in the wake of the pandemic,

Key Takeaways Homebuilders shares rose after the Fed announced a 50 basis point interest rate cut Wednesday. Bank of America increased its price target for seven hombuilders by an average of 11%. Lennar will report earnings after the bell Thursday,

Falling interest rates can become a tailwind for dividend-paying stocks, including banks but also nonfinancial companies like Delta and United Health.