Closing Recap

U.S. stocks finished mixed in a choppy session dominated by the Federal Reserve’s policy meeting, as the Fed delivered an expected rate cut but offered a more measured outlook on future easing near ATH, causing an initial rally to fade; the dollar reversed to finish higher, while oil fell and gold was little changed. In the currency markets, the U.S. dollar executed a dramatic reversal, erasing sharp losses to end higher as traders digested a “hawkish cut” from the Fed. This pushed the EUR/USD back from four-year highs, with a massive options expiry at the 1.1800 strike acting as a magnet, while the GBP/USD also pared strong gains. 

Key Takeaways 

• Fed Cuts Rates by 25bps, Powell Cautious: The FOMC cut the Fed Funds rate by 25 basis points to a 4.00-4.25% range, as widely expected. However, Chair Powell’s “risk management” framing and a less dovish “dot plot” tempered market enthusiasm. 
• Stocks Reverse After Fed Decision: Major indices initially rallied on the rate cut but reversed course during Powell’s press conference to finish mixed, with the S&P 500 flat and small caps giving back strong gains. 
• “Dot Plot” Shows Fewer 2026 Cuts: While the Fed still projects two more cuts in 2025, the median projection for 2026 was revised to just one cut, more hawkish than the market was pricing. 
• Trump Nominee Dissents for 50bps Cut: Newly appointed Fed Governor Stephen Miran was the sole dissenter, voting for a more aggressive 50-basis-point cut, while Governors Bowman and Waller did not join him as some expected. 
• Dollar Gains: The U.S. dollar reversed sharp losses to end higher as the Fed’s outlook was less dovish than anticipated, causing the Euro and Pound to pare strong gains while the Yen also weakened against the greenback. 
• Bitcoin steadied near $117,000, finding support from the Fed’s rate cut and positive SEC news on crypto ETP listing standards. 
• Oil Slips Despite Inventory Draw: Crude oil prices fell despite a massive 9.3 million barrel draw in U.S. crude inventories. 
• Yields Volatile: Treasury yields initially plunged on the Fed statement but reversed sharply higher during Powell’s presser, with the 10-year finishing up on the day. 

Market Overview

U.S. equity markets experienced a day of significant volatility, ultimately finishing mixed as investors digested a nuanced and somewhat “hawkish” rate cut from the Federal Reserve. The market had been trading around record highs, eagerly awaiting the Fed’s decision. As expected, the FOMC delivered a 25-basis-point interest rate cut, a move that initially sent stocks, particularly rate-sensitive small caps, rallying higher. 

Index	Up/Down	% Change	Last
DJ Industrials	260.42	0.0057	46018
S&P 500	-6.34	-0.001	6600
Nasdaq	-72.63	-0.0033	22261
Russell 2000	4.31	0.0018	2407

However, the devil was in the details. The Fed’s updated Summary of Economic Projections (the “dot plot”) revealed that while a narrow majority (10 of 19 officials) still sees at least two more rate cuts this year, the outlook for 2026 was revised to just a single cut, less than the market had priced in. During his press conference, Fed Chair Jerome Powell described the move as a “risk management” cut focused on the weakening labor market but offered little in the way of strong commitment to a prolonged easing cycle. This cautious tone caused the initial rally to completely reverse, with stocks selling off and Treasury yields spiking from their lows. 

The session was a classic example of “buy the rumor, sell the news,” with the market having fully priced in a dovish outcome. The Fed’s more measured stance, with something for both bulls and doves, forced a rapid repricing of future interest rate expectations. Analysts at Nomura, for example, now expect follow-up cuts in October and December, fitting the market consensus. By the close, the S&P 500 had given back all its gains to finish where it started the day, a testament to the uncertainty the Fed’s communication injected into the market as it firmly placed the onus on future data to justify more easing.

Economic Calendar

The Federal Reserve’s policy decision was the sole focus yesterday. The market now looks ahead to a key jobless claims report and the Bank of England’s rate decision today. 

Yesterday’s Major U.S. Events: 

• FOMC Interest Rate Decision: Cut the Fed Funds Rate by 25 basis points to a target range of 4.00% – 4.25%. 
• FOMC Summary of Economic Projections (SEP) / “Dot Plot”: Showed a median of two more cuts in 2025, but only one cut in 2026. 

Key Today: 

• U.S. Weekly Jobless Claims: (Expected: 240K, Prior: 263K). The first major labor market report since the Fed meeting. 
• Bank of England (BoE) Rate Decision: (Expected: Hold at 4.00%). 

Commodities, Treasuries and Currencies 

Gold prices finished lower, with the December futures contract down $7.30 to settle at $3,717.80 per ounce, pulling back ahead of the Fed’s decision. Crude oil prices also declined, with WTI falling $0.47 (-0.73%) to settle at $64.05/bbl. The drop came despite a massive 9.3 million barrel draw in U.S. crude inventories, suggesting broader demand concerns or profit-taking weighed on the market. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-0.47	USD/bbl	64.05
Brent	-0.52	USD/bbl	67.95
Gold	-7.3	USD/oz	3717.8
EUR/USD	-0.0021	USD	1.1846
USD/JPY	0	JPY	146.5
10-Year Note	0.034	%	0.0406

In the currency markets, the U.S. dollar experienced extreme volatility. The DXY initially plunged to a 4-year low on the rate cut announcement but then staged a powerful reversal to finish higher as traders interpreted the Fed’s overall message as less dovish than anticipated. This sent the EUR/USD pair tumbling from four-year highs back towards the 1.1800 level, a key area where a large $3.2 billion options expiry is set for tomorrow, which could act as a magnet for price. The Japanese Yen also weakened significantly, with USD/JPY spiking higher as the Fed-BoJ policy divergence was reinforced. 

Treasury yields were also on a wild ride. The 10-year yield initially plunged below 3.99% on the Fed statement but then rocketed higher during Powell’s press conference to finish up on the day, settling above 4.06%.

Looking Ahead 

The market is now in full data-dependent mode, with every major economic release being scrutinized for its potential to sway the Federal Reserve’s thinking ahead of the October meeting. Today brings key U.S. jobless claims data and central bank decisions from the Bank of England and Bank of Japan. Chair Powell’s emphasis on the weakening labor market suggests that the October and November jobs reports will be absolutely critical for determining if the Fed delivers the additional cuts the market is still pricing in.