Dow Gains While S&P & Nasdaq Slip as Fed’s Rate Cut Offers Mixed Signals

Markets oscillate post-Fed cut as investors digest what’s next for growth, inflation, and policy direction

U.S. stock markets ended mixed after Wednesday’s Federal Reserve rate cut — the first since December 2024. The Dow Jones Industrial Average rose 0.6%, while the S&P 500 slipped about 0.1% and the Nasdaq Composite dropped 0.3%. Futures for the S&P and Nasdaq moved higher afterward, signalling hopes for further easing ahead.

Key Market Moves

• The Dow benefited from interest rate-sensitive sectors and financial stocks, which tend to fare better when borrowing costs ease.
• Both S&P 500 and Nasdaq were weighed down by weaker performance among big tech and growth names; these sectors appear more cautious amid inflation uncertainty and questions about how aggressive future cuts will be.
• The 10-year U.S. Treasury yield rose slightly to around 4.09%, showing that bond markets are balancing between the relief from rate cuts and ongoing inflation pressures.
• Gold pulled back from recent highs, falling nearly 0.8%, as some of the safe-haven demand eased with rate cut expectations more fully priced in.

What’s Behind the Mixed Reaction

• Investors broadly expected a 25 basis point rate cut, which the Fed delivered, but were keenly watching its updated forecasts, especially the “dot plot”, for clues on how many additional cuts may come. Some projections suggest two more cuts in 2025, but there's disagreement among members.
• Inflation remains a concern. While price pressures appear to be cooling in certain areas, others (especially in services and wages) haven’t shown dramatic improvement, causing markets to remain cautious.
• Economic data has shown signs of labor market softening, which adds weight to the case for cuts but also raises fears about potential slowdown.

Risks & What to Watch

• Fed messaging: Any signal that future cuts will be slower or conditional could dampen enthusiasm in equities.
• Inflation surprises: Strong inflation prints could force the Fed to stay higher longer than markets expect.
• Tech earnings and valuations: High expectations in growth sectors make them vulnerable to disappointments.
• Global and geopolitical events: Disruptions can shift risk sentiment quickly; markets are still fragile with respect to shocks.

In summary, Wednesday’s rate cut by the Fed triggered modest gains in Dow sectors but failed to lift the broader market. The mixed results reflect investor uncertainty about how quickly and how far the Fed will move from here. The core theme: rate easing begins, but markets remain caught between optimism and caution.