Fed Cuts Rates by 25 bps, Market Finishes Mixed as Mega-Cap Weakness Weighs on Gains

The stock market spent most of Wednesday’s session without much conviction, trading near its opening levels as investors digested the FOMC’s decision to cut the federal funds rate target range by 25 basis points. Index-level gains were limited by weakness in the mega-cap cohort, even as broader participation helped keep the overall market resilient.

The major averages looked calm on the surface, closing not far from where they began, though there was a brief surge of volatility around the Fed announcement. The initial spike carried the Dow Jones Industrial Average to a fresh all-time high of 46,261.95 and brought the S&P 500 within striking distance of a record close. Even the Nasdaq Composite briefly climbed back to its flatline before sellers stepped in, sending the indices down to session lows.

While the cut itself was fully expected, investors were far more focused on what the Fed’s updated projections signaled about the path ahead. Policymakers remain divided: nine of the 19 participants now anticipate just one additional cut this year, ten foresee two, and one projects none at all. Despite the split, futures markets took today’s developments as confirmation that more easing lies ahead. According to the CME FedWatch tool, the probability of at least one more cut in October now stands at 89.9%, up from 78.2% yesterday, while the odds of another in December climbed to 83.9% from 72.8%.

Beyond this year, though, the outlook grew murkier. The 2026 median forecast now sees just one cut, down sharply from the three implied by futures prior to the meeting, reflecting caution about how aggressively the Fed will ease over the longer term.

Sector performance painted a mixed picture. Information technology, industrials, consumer discretionary, communication services, and real estate all finished lower, with mega-cap names under pressure throughout the day. NVIDIA was hit particularly hard, sliding 2.6% after reports that China urged domestic firms to halt purchases of its products. The Vanguard Mega Cap Growth ETF fell 0.4%, highlighting the outsized drag from the market’s largest names, though the equal-weighted S&P 500 managed a slight gain.

Other parts of the market fared better. Financials and consumer staples led the winners with gains of 1.0% and 0.9%, respectively, while smaller-cap indices gave back some of their early strength but still ended mixed, with the Russell 2000 up 0.2% and the S&P Mid Cap 400 down 0.2%.

Corporate headlines were light, though StubHub’s IPO drew interest early, opening above its pricing range before fading to close below its offering price.

Ultimately, the session underscored the market’s balancing act: reassured by confirmation of near-term easing but cautious about how far that path will extend. With the Fed’s latest move now in the books, monetary policy remains the central storyline driving investor sentiment into year-end.

Our FTinvest 11 model portfolio index managed to extend its record-setting run, though just barely. After spending much of the session oscillating around its flatline, the index closed with a fractional gain of 0.02%, finishing at a new record high of 862.92.

The day’s action reflected a lack of conviction on either side of the tape. Early softness hinted at possible profit-taking after last week’s rally, but mild afternoon buying kept the index above water. Despite the negligible advance, the record close underscores the resilience of the portfolio even in a session defined by hesitation.

With the benchmark carving out another all-time high, the focus shifts toward whether momentum can continue into the latter half of the week or if the market will pause for consolidation after its steady climb.