S&P 500: Will the Fed’s Rate Cut and 2025 Outlook Propel a Year-End Market Rally?

What’s Driving Wall Street Ahead of the Fed’s Decision?

Wall Street’s major indexes traded cautiously on Wednesday as traders awaited the Federal Reserve’s interest rate decision and projections for 2025. While a 25-basis-point rate cut is widely expected, attention is focused on Fed Chair Jerome Powell’s comments for insights into future monetary policy amid strong economic data and persistent inflation concerns.

At 17:25 GMT, the Dow Jones Industrial Average is trading 43654.86, up 204.96 or +0.47%. The S&P 500 Index is at 6068.62, up 18.01 or +0.30% and the Nasdaq is trading 20158.50, up 49.44 or +0.25%.

Can Tech Stocks Maintain Momentum as Yields Climb?

The 10-year Treasury yield edged higher to 4.3968%, reflecting tempered expectations for aggressive rate cuts next year. Rising yields added pressure on rate-sensitive stocks, with the tech-heavy Nasdaq facing potential headwinds despite its 34% year-to-date gain. AI-driven optimism has fueled much of the sector’s rally, but a hawkish Fed stance could challenge the outlook.

Will the Dow Snap Its Nine-Day Losing Streak?

Traders are closely monitoring the Dow Jones Industrial Average, which is in the midst of a nine-session losing streak, its longest since 1978. Gains in healthcare stocks provided some mid-session support, with Merck advancing slightly after announcing a $2 billion partnership with Hansoh Pharmaceuticals to develop an experimental obesity drug.

Still, uncertainty about the Fed’s tone and economic projections leaves the Dow’s recovery uncertain. A bearish Fed message could extend the losing streak, making the index’s performance a key indicator of market sentiment as the session progresses.

Earnings Paint a Mixed Picture Across Key Sectors

Earnings results delivered mixed signals mid-session. Birkenstock surged 7.8% after surpassing fourth-quarter expectations, underscoring strength in discretionary retail, while General Mills dropped 4% after cutting its annual profit forecast, reflecting headwinds in consumer staples.

Crypto-focused stocks also underperformed as bitcoin fell 1.9%. MARA Holdings and Riot Platforms declined 2.1% and 1.9%, respectively, weighed down by a weaker appetite for risk assets ahead of the Fed decision.

Market Forecast: Will the Fed’s Decision Turn Sentiment?

Traders are bracing for potential volatility as they await Powell’s comments and the Fed’s summary of economic projections. A dovish tone signaling future rate cuts could support a bullish close, particularly for technology and discretionary sectors. Conversely, signs of prolonged inflation or slower easing may weigh on equities and extend the Dow’s losing streak.

While the broader market remains up significantly for the year, Wednesday’s outcome could set the tone for year-end positioning and sector performance. Traders are watching closely to see if the Dow can break its streak and close in positive territory.

More Information in our Economic Calendar.