Stocks Slip After Powell Tempers Rate Cut Expectations

The stock market opened with modest optimism on Wednesday, bolstered by light volume and a largely expected decision from the Federal Open Market Committee to keep the federal funds rate unchanged at 4.25%–4.50%. But that early strength faded as Fed Chair Jerome Powell’s post-meeting remarks dampened hopes for a September rate cut, triggering a wave of selling in both equities and Treasuries.

While the rate decision itself held no surprises, it marked a rare moment of dissent: Fed Governors Christopher Waller and Michelle Bowman both voted in favor of a 25-basis-point cut—making this the first time since 1993 that two FOMC members dissented in favor of easing.

During his press conference, Powell acknowledged the potential for future rate reductions but emphasized that substantial cuts are unlikely unless the labor market weakens meaningfully and restrictive monetary policy is clearly holding back growth. His cautious tone cooled the market’s optimism. The implied probability of a September rate cut tumbled to 48.1%, down from 64.6% just a day earlier.

The S&P 500 slipped 0.1%, and the Dow Jones Industrial Average dropped 0.4%, as selling pressure picked up throughout the afternoon. The Nasdaq Composite managed to claw back into positive territory, closing up 0.2%, buoyed by selective strength in mega-cap tech names.

Sector performance reflected the market’s shifting mood. Utilities (+0.7%) led for most of the session, and a late-session rebound helped information technology (+0.4%) and communication services (+0.2%) finish with modest gains. The Vanguard Mega Cap Growth ETF closed up 0.3%, offering some ballast to the broader market.

Still, declines were widespread. Materials (-2.0%), real estate (-1.4%), and energy (-1.4%) bore the brunt of the sell-off. In fixed income, the 10-year Treasury yield rose six basis points to 4.38%, hitting its 200-day moving average, as bonds fell in tandem with stocks.

Economic data earlier in the day showed resilience: the advance estimate for Q2 GDP came in stronger than expected, giving the Fed further cover to maintain its cautious stance. ADP’s July employment report also surprised to the upside, reinforcing the message that the labor market remains tight.

A full slate of earnings reports had limited impact on the broader market Wednesday morning. But attention shifted quickly to after-hours releases from Microsoft and Meta Platforms—two of the market’s heavyweights—which could provide the next catalyst for direction if results exceed expectations.

FTinvest 11 made another run at its all-time high on Wednesday, showing strength early in the session and briefly edging close to a new record. For a moment, it seemed that a new milestone was within reach.

However, the tide turned shortly after Federal Reserve Chair Jerome Powell began his post-FOMC press conference. Market sentiment cooled in response to his cautious tone on future rate cuts, and FTinvest 11 gradually lost momentum.

By the close of trading, the index had slipped 0.19% to 806.34, pulling back modestly from its earlier highs. Despite the decline, FTinvest 11 remains within striking distance of its all-time peak, with bullish momentum still intact over the broader trend.