Market Recap - Wednesday, September 17, 2025
Stocks End Mixed as Fed Cuts Rates, Signals More to Come
Stocks finished today’s session with mixed results as investors digested the Fed’s widely expected decision to cut interest rates by 25 basis points. The Dow led the way with a +0.57% gain, while the S&P 500 slipped 0.10%, the Nasdaq lost 0.33%, and the Russell 2000 edged up 0.18%. It was a choppy session, with investors rotating away from big tech and momentum names into small caps, financials, and defensive sectors.
The Federal Reserve lowered its key interest rate to a range of 4.00–4.25%, with one dissent calling for a more aggressive 50bp cut. The Fed’s updated projections (dot plot) signaled another 50bp of cuts expected this year, and the official statement struck a slightly more dovish tone by acknowledging weakening labor market conditions and rising risks to employment. However, Fed Chair Powell pushed back on the idea of a 50bp cut anytime soon and noted that labor softness may be more about supply constraints than overall demand deterioration.
Sectors like banks, insurers, credit cards, consumer staples, airlines, and telecom outperformed. Meanwhile, underperformers included software, railroads, machinery, homebuilders, and oil services. Nvidia lagged after the Financial Times reported that Chinese regulators ordered major tech companies to stop buying its AI chips—raising concerns about the durability of AI demand from China. Treasuries sold off slightly, with short-term yields rising. The dollar rebounded, gold dipped, and crude oil slid 0.7%.
On the economic front, housing data disappointed: August housing starts and building permits both came in below expectations, pointing to continued weakness in residential construction despite recent optimism about lower mortgage rates. Elsewhere, Lyft surged on news of a new partnership with Waymo to launch autonomous ride-hailing in Nashville, while Workday jumped after activist investor Elliott disclosed a significant stake and backed company leadership.
Here’s Our Take:
Today’s Fed cut was fully priced in, but the market struggled to find clear direction after the announcement. While the dot plot and statement leaned dovish, Powell’s tone wasn’t overly aggressive about future easing, leaving investors unsure whether the Fed will act as fast as they’ve hoped. Still, with two more cuts expected by year-end, the overall trajectory remains supportive for risk assets.
Tech stocks remain under pressure, especially after China’s reported ban on Nvidia chip purchases — a reminder that AI optimism is vulnerable to geopolitical shocks. At the same time, strong consumer resilience, falling inflation, and a pivoting Fed continue to offer a favorable backdrop. We see this as a healthy pause rather than a trend reversal. Rotations into banks and small caps suggest investors are repositioning rather than fleeing risk. The next catalyst will come from Thursday’s economic data and how companies guide for Q4 as earnings season continues. Stay tuned.
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