US Stocks Mixed as Fed Cuts Rates Amid Labor Market Jitters
A 25-basis-point cut, driven by rising unemployment, fails to ignite a broad rally as investors weigh a divided outlook from policymakers.
Wall Street delivered a fractured verdict on the Federal Reserve’s latest interest-rate cut Wednesday, with major indices closing mixed as investors digested a complex message of immediate stimulus overshadowed by concerns of a weakening U.S. labor market.
The central bank enacted a quarter-point rate reduction, its third in as many meetings, moving the federal funds rate to a target range of 3.5% to 3.75%. While the move was widely anticipated, it failed to spark the broad rally some had hoped for. The Dow Jones Industrial Average posted a modest gain of 0.3%, while the S&P 500 finished the day flat and the tech-heavy Nasdaq Composite fell 0.4%.
The policy easing comes against a backdrop of deteriorating employment data. Fed Chair Jerome Powell acknowledged in his post-meeting press conference that “downside risks to employment have risen in recent months,” a view substantiated by a recent government report showing the national unemployment rate climbing to 4.4%.
The Fed’s decision was explicitly aimed at supporting a labor market that is “losing momentum,” according to Powell. This focus on employment marks a significant narrative for the markets, suggesting that future Fed policy may be more reactive to job data than to inflation figures alone. The concern was underscored by private payroll data from ADP, which gained heightened importance after a recent government shutdown delayed official reports, showing an unexpected loss of 32,000 private-sector jobs in November.
However, any dovish interpretation of the rate cut was tempered by clear divisions within the Federal Open Market Committee (FOMC). The vote was not unanimous, and the committee’s own projections signal a significant slowdown in monetary easing. The median forecast from FOMC participants indicated the possibility of only one more 25-basis-point cut by the end of 2026, a hawkish tilt that checked investor optimism.
“While the Fed delivered the cut the market was looking for, the fine print suggests a committee that is far from unified on the path forward,” noted one strategist. “The split vote and the modest projection for future cuts tell us that the bar for further easing is higher than the headline number suggests.”
The market’s reaction reflected this uncertainty. While lower Treasury yields provided some support to financial and industrial stocks, the technology sector, which is often more sensitive to long-term growth expectations, faltered. This rotation suggests investors are positioning for an economic environment defined by slower growth rather than a new cycle of aggressive monetary stimulus.
Looking ahead, market participants will be closely parsing upcoming economic data, particularly the next official jobs report and inflation readings, for clues on the Fed’s next move. With the central bank itself appearing divided and data-dependent, the market is bracing for a period where economic weakness, rather than strength, could be the primary driver of policy decisions.