Markets closed on an exuberant high after the Federal Reserve delivered the widely anticipated quarter-point rate cut, while offering an even more encouraging surprise: a more optimistic outlook for 2026 and an open door to additional easing.
The reaction was immediate:
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Dow Jones: +1.05%, its best Fed Day since December 2023
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$S&P 500(.SPX)$ : +0.67%
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Nasdaq: +0.33% $Microsoft(MSFT)$
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Hot Stock: $GE Vernova Inc.(GEV)$ +15.6%
$GEV
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Biggest Loser: $Uber(UBER)$ –5.5%
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Best Sector: Industrials +1.8%
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Worst Sector: Utilities –0.1%
Investors had waited six weeks for this moment. They got the cut, and a narrative that was far more complex than the rally suggests.
Key Takeaways From the Fed Meeting
FOMC
1. The Cut Was Expected, the Messaging Was Not
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FOMC delivers a 25 bps rate cut, fully in line with expectations.
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But cutting during positive economic growth reflects concerns about slowing momentum, policy lags, tighter credit, and geopolitical risk.
2. Labor Market Concerns Take Center Stage
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Powell acknowledged that the labor market is cooling more gradually than expected, but also hinted at the risk of sharper deterioration ahead.
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This was the main justification for cutting now.
3. Better Growth Ahead - Lower Inflation
The Fed raised its GDP forecast for 2026, lowered inflation expectations, and sees unemployment stable at 4.4% in 2026. Powell described the base case as one of “solid growth.”
Paradox: Cutting because of economic risks, while forecasting stronger growth. This contradiction echoed throughout the meeting, and even within the committee.
Internal Division: The Most Dissents Since 2019
Three Fed officials dissented:
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Gov. Stephen Miran: Wanted a larger 50 bps cut
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Austan Goolsbee (Chicago Fed): Wanted no cut
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Jeffrey Schmid (Kansas City Fed): Wanted no cut
This highlights a deep, unusual tension inside the Fed over the dual mandate:
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Keep inflation anchored
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Avoid damaging employment
The rift signals that policy direction in early 2026 may be less predictable than markets assume…
Markets Expect More Cuts, but the Fed Does Not
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Markets are pricing two cuts in 2026
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The Fed’s own projections show only one
This is the biggest risk to the current rally…
Tariff Trouble Ahead: A Supreme Court Wild Card
Supreme Court
On top of Fed volatility, investors could face a major trade-policy shock within days.
The Supreme Court is poised to rule on whether President Trump has unilateral authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA).
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A ruling against Trump could invalidate key tariffs, altering U.S. trade strategy.
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It could also affect the federal deficit and trigger billions in corporate refunds.
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Firms like Costco have already filed to secure potential refunds.
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The Court could issue a broad ruling, or a narrow one focusing only on emergency-specific tariffs such as fentanyl-related or reciprocal tariffs.
Decision could arrive as soon as tomorrow…
What’s Next
Earnings :
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Ciena
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Lululemon Athletica
Expect volatility to remain elevated as markets digest the Fed’s path, Supreme Court risk, and end-of-year positioning.
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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.
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