Markets React to Fed’s First Rate Cut of 2025 Amid Mixed Sector and Commodity Moves

Image Source: Krish Capital Pty Ltd

Index Update

US stocks swung on Wednesday after the Fed’s 25bps cut and guidance for two more reductions this year. The Dow gained over 300 points on strength in consumer staples and financials, while the S&P 500 and Nasdaq 100 edged lower as Nvidia and Broadcom slid on China’s AI chip restrictions. FOMC projections showed stronger growth and employment than expected, but higher inflation forecasts tempered hopes for a faster easing cycle.

Market Movers

On Wednesday, the top gainers were SciSparc Ltd. (+142.93%), followed by Visionary Holdings Inc (+68.17%). On the contrary ChowChow Cloud International Holdings Limited (-32.59%), and Angel Studios, Inc. (-32.38%) declined the most the same day.

Commodities Update

WTI crude fell below $64 and Brent slipped under $67 per barrel, extending losses as traders weighed US inventory data and the Fed’s rate cut. While crude stocks dropped 9.3 million barrels on higher exports, distillate inventories climbed to their highest since January, dampening sentiment. Despite the Fed’s dovish stance that could support demand, markets remain cautious amid signs of slowing activity in the US and China, with steadier demand in Europe, the Middle East, and Latin America keeping global consumption at 104.4 million bpd.

Gold eased toward $3,630 per ounce as a stronger US dollar pressured prices following the Fed’s 25bps cut. Chair Powell emphasized a cautious, meeting-by-meeting approach, framing the move as risk management. Still, gold remains up 39% this year, supported by easing expectations, geopolitical uncertainty, and strong central bank buying, with Indian investors holding onto bullion in anticipation of further gains.

Macro Updates

The Fed cut rates by 25bps in September 2025 to 4.00%–4.25%, its first reduction since December, with Governor Stephen Miran dissenting in favor of a larger cut. Policymakers now project another 50bps of easing this year and 25bps in 2026, alongside upgraded GDP forecasts through 2027. Inflation estimates for 2026 were revised higher, while unemployment expectations remain steady at 4.5% for 2025 and slightly lower at 4.4% for 2026.

Bonds Commentary

The 10-year US Treasury yield held near 4.07% after a recent uptick, as markets absorbed the Fed’s quarter-point cut and outlook for limited easing ahead. Chair Powell described the move as “risk management” tied to labor market weakness, while signaling two more cuts this year and just one in 2026. Newly appointed Governor Stephen Miran dissented, favoring a larger 50bps cut, though overall divisions were fewer than expected.

Futures Update

US futures advanced on Thursday following the Fed’s first rate cut of the year, with the S&P 500 up 0.9%, Nasdaq 100 gaining 1.3%, and Dow rising over 300 points. Markets saw volatility after Chair Powell framed the cut as a “risk management” step, emphasizing that no policy path is without risks. Investors are betting the Fed will prioritize its employment mandate after cutting rates by 25bps and signaling further reductions ahead. Nvidia rose over 3% premarket, while Intel surged nearly 29% on news of a $5 billion minority investment from Nvidia.

Stocks experienced a lackluster performance for much of Wednesday's session before experiencing significant volatility in the afternoon following the highly anticipated Federal Reserve monetary policy announcement. The S&P 500 declined by 6.41 points, or 0.10%, closing at 6,600.36. From a technical standpoint, the index held support at key levels and maintained a steady upward trend, indicating potential for further gains in the near term. Additionally, the 14-day Relative Strength Index (RSI) is trending upwards, supporting a bullish outlook. Critical support levels are around 6,520, with resistance expected near 6,720.