US Stocks Rally After Fed Cut – Dow up 1%
US markets pushed higher overnight as the Federal Reserve cut rates by 25 basis points and signalled the potential for another reduction in 2026. The move helped lift equities across the board, with the Dow jumping 1.05% to 48,057, the S&P 500 rising 0.67% to 6,886, and the Nasdaq adding 0.33% to 23,651. Treasury yields dropped after the decision, with the 2-year slipping 7.6 bps to 3.538% and the 10-year down 4.1 bps to 4.147%, while the US dollar weakened sharply, the DXY falling 0.58% to 98.66. The softer greenback provided a tailwind for commodities. Brent crude climbed 1.21% to $62.29, while WTI gained 0.36% to $58.46 following reports that the US had seized an oil tanker near Venezuela. Gold also extended its recent strength, rising 0.49% to $4,228.79 as lower yields and a weaker dollar improved demand.
Fed Cuts 25 – But What Now?
It has been a relatively muted reaction in markets to last night’s Fed rate cut as investors digest the 25-basis-point cut and the dot plot that predicts just one cut in 2026. Market commentators are split on guidance from Jerome Powell and the FOMC, with the statement, dot plot and press conference all giving a bit of fuel to both doves and hawks. That is probably a fair call given the issues the Fed are facing, as we still see sticky inflation competing with a falling (but not by too much) jobs market. The initial reaction has been a lean towards a dovish conclusion, with stocks rallying and the dollar and yields falling; however, the next couple of trading sessions will probably give us a more conclusive answer on what investors really think the Fed’s path will be in 2026. Most market participants are expecting to see some choppy trading in the days ahead as the market continues to adjust and we start to hear from individual Fed members after they are released from their meeting-talks shutdown.
Another Busy Day Ahead for Traders
With investors still digesting the Fed’s outlook, attention now shifts to a packed schedule today. There are further data and central bank updates due across the trading sessions, and investors are expecting more volatility. The Asian session will see a big focus on Australian markets with key employment data due out. The monthly Employment Change number is expected to show a 20k increase, and the Unemployment Rate is expected to increase to 4.4%, and any deviations will likely see some big moves for the Aussie. The London session will see the latest update on interest rates from the Swiss National Bank, with expectations that they will keep rates on hold at 0% despite continuing low-inflation conditions. Again, traders are expecting moves in the franc on updates from the statement and press conference. It is a quieter day in the US session today with just the weekly unemployment claims (exp. 220K) on the calendar; however, investors are expecting to see more reaction from last night’s Fed update to keep markets moving.
