Weekly Market Recap: Fed's Bold Rate Cut Boosts U.S. Equities Amid Global Market Reactions

Market Overview:

U.S. equities posted gains despite September's historically poor performance, buoyed by a rate cut rally. The S&P 500 hit fresh all-time highs, with the Nasdaq and Dow also advancing. Small caps outperformed, with the Russell 2000 gaining 2.5%. While the Fed’s half-percent rate cut was the focal point, a subdued outlook from FedEx and rising geopolitical tensions dampened Friday’s performance. Internationally, European markets slipped as the Bank of England held rates steady, and Asian markets rose, led by Japan and Hong Kong, after the Bank of Japan maintained dovish policies.

Federal Reserve Insights and Economic Roundup:

The Federal Reserve cut rates by 50 basis points, its first cut in four years, signaling a commitment to full employment. While the decision wasn’t unanimous, Chairman Powell found consensus, with markets rallying in response to the bold move. The Fed’s longer-run neutral rate target moved to 3%, limiting potential Treasury yield declines. Economic data revealed strength in Q3, with retail sales outperforming expectations, though department stores and restaurants struggled. Consumer spending growth continues despite emerging labor market weakness, leaving the Fed balancing mixed signals.

The Week Ahead:

Next week brings key economic reports, including manufacturing and services PMI data, consumer confidence indices, GDP revisions, durable goods orders, and inflation indicators like the Core PCE Price Index. Investors will also focus on personal spending data, home sales figures, and updates on the U.S. trade balance.