Hear that? A tsunami-sized sigh of relief just swept across the US now that the Federal Reserve has finally decided to cut rates for the first time this year.

After two tense days of deliberations, the Federal Open Market Committee announced its decision to slash rates by a quarter-point to a range of 4.00% to 4.25%.

Although this news was no shocker, escalating pressure from President Trump and a weakening economy have kept investors on their toes. The Fed also signaled that two additional cuts are in the cards before the end of the year—one more than central bankers expected back in June.

Fed Chair Jerome Powell maintained that the labor market was the main driver of today’s cut, explaining during the press conference, “Kids coming out of college, and younger people, minorities, are having a hard time finding jobs.” But he maintained that these cuts didn’t arrive “too late” as Trump loves to say, stating, “I think we were right to wait.”

One small cut, one huge step for the Fed

The central bank’s 11-to-1 vote revealed less dissent in the ranks than anticipated. The only outlier was Trump appointee Stephen Miran, who was sworn in mere minutes before deliberations began yesterday. He voted for a deeper half-point cut, although Powell noted that the FOMC’s new guy didn’t get much backup, saying, “There wasn't widespread support at all for a 50-basis-point cut this week.”

Although today’s FOMC dot plot map suggests we’ll see a total of three rate cuts in 2025, 2026 is a different story. Markets were anticipating two to three more rate cuts next year ahead of today’s meeting, but the dot plot revealed that the FOMC thinks there will be just one cut in 2026—a conservative stance that spooked investors this afternoon.

“The dot plot indicates a path of two more quarter point interest rate cuts in 2025, but significant dispersion in 2026, with some looking for significant cuts while others expect none,” senior investment strategy director at Seattle-based US Bank Asset Management Rob Haworth told Brew Markets. “The equity market initially cheered the move toward more rate cuts this year, but may be concerned about the dispersion of 2026 expectations.”

So, what’s next?

The economy continues to complicate the Fed’s juggling act of tempering inflation without undermining the job market. Unemployment crept upward in August to 4.3%, its highest level since 2021, and judging by Powell’s press conference, the labor market is becoming the Fed’s primary concern. But don’t forget that consumer prices just rose 2.9% year over year to a seven-month high, and Fed officials are still worried that tariffs might spark inflation to run a bit hotter than previously expected in 2026.

“The Federal Reserve is now stuck between a soft landing and a hard place with a weakening labor market, yo-yo consumption, and confusion over whether 3% inflation has taken up semi-permanent residence,” explained Running Point Capital Advisors Chief Investment Officer Michael Ashley Schulman.

One thing is for certain: Today’s interest rate cut doesn’t mean the Fed drama is over. If anything, it’s only just begun.—JD

🟢 What’s up

• HR software company Workday jumped 7.25% after activist investor Elliott Management revealed a $2 billion stake in the company.
• Netflix gained 2.33% on the back of an upgrade from analysts at Loop Capital, who announced the company has “won the streaming wars.”
• Alibaba continues to make strides in the AI industry, landing a big customer for its new chips. Shares rose 2.44%.
• Speaking of Chinese AI, Baidu bounced 11.34% after Arete Research Services upgraded the tech company from sell to buy, citing growing AI and cloud revenue.
• Lyft ascended 13.13% on news that the rideshare company’s robotaxi service will roll out in Nashville next year. Rival Uber fell 4.99%.

What’s down

• Nvidia dropped 2.62% on a report by the Financial Times that China’s internet regulator has banned local tech companies from buying Nvidia’s chips.
• Meta Platforms fell 0.42% ahead of Mark Zuckerberg’s keynote address this evening at Meta Connect, where he’s expected to roll out new smart glasses.
• General Mills dropped 0.77% after the consumer staples company reported a decline in first-quarter sales.
• RCI Hospitality, the only publicly traded strip club on the market, sank 10.39% after the New York Attorney General accused the company of bribing its financial auditor with free lap dances.

It’s been a big month for big IPOs: Klarna popped 15% on the day of its public debut, Gemini Space Station rose 14.29% on day one, and Black Rock Coffee jumped 38%. And it’s not just September: Ritholz Chief Market Strategist Callie Cox recently noted that, through the end of August, shares of new companies surged an average of 35% on their first day of trading. That makes 2025 the best year for public debuts since 2000.

It’s gotten to the point that IPOs seem to be sure things—so you might be surprised to see that StubHub fell 6.38% on its first day of trading today. Who could have seen that coming?

Actually, we did. Brew Markets podcast host Ann Berry warned earlier this week that StubHub’s valuation didn’t make sense considering how profits have been trending down while marketing expenses are rising dramatically.

She dove into the company’s S-1 filing to learn more about StubHub’s business model—listen here to learn more about why she didn’t like what she found.

After weeks of lukewarm macro data, political infighting, the erosion of the Fed’s independence, and a lot of Truth Social posts, it’s finally happened: The Federal Reserve greenlit a quarter-point rate cut.

We’ve discussed what that means for the broader economy—when the Fed cuts rates, it supercharges businesses by making borrowing far cheaper, juicing the economy—but what it means for investors is less straightforward.

Some strategists believe that a rate cut means a “wall of cash” will replace the market’s “wall of worry.” In other words, now that rate cuts have finally arrived, the $7 trillion that Americans have parked in money market funds will pour into the stock market and push stocks higher.

Some data backs up that reasoning: JPMorgan pointed out that, historically, when the Fed lowers borrowing costs at the same time the S&P 500 is within 1% of an all-time high (which it is now), the market gets a boost of roughly 15% over the next year.

Buy the rate-cut rumor, sell the news?

But many top strategists aren’t quite so optimistic. It may seem counterintuitive, but analysts from Morgan Stanley, Oppenheimer, and others are warning of a potential downturn after today’s rate cut announcement.

The reason is that a 25-point basis point cut might not substantially boost the beat-up labor market as much as hoped. Considering that so much of the S&P 500’s recent record run is about AI hype centered around a key few stocks, if increasingly pessimistic macro data keeps coming out despite the rate cut, that could turn sentiment negative fast.

“In the near term, the risk for equities is the tension between weak labor market data and a Fed that still appears focused on inflation risks from tariffs. What this means for equity investors is that the Fed could disappoint the markets' ‘need for speed’ in terms of rate cuts in the near term,” wrote Morgan Stanley CIO Mike Wilson this week.

That being said, most pros still have bullish year-end price targets, despite the market’s sky-high valuations: “We expect S&P 500 earnings per share to grow 8% this year and a further 7.5% in 2026, and we do not see any negative catalyst on the horizon that could drive a material derating,” wrote UBS CIO Ulrike Hoffmann-Burchardi today.

How to handle the uncertainty

It may not be smooth sailing ahead, but that doesn’t mean there’s no way to play the moment.

Citi analysts pointed to a group of stocks that are particularly sensitive to interest rate cuts, including DocuSign, Gap, EchoStar, and others, that could pop on today’s news. They also noted that small- and mid-cap stocks tend to benefit from rate cuts, as do growth investments. But that all depends on what happens next with the economy.

“The better the economic backdrop, the more attractive cyclicality and/or longer-duration risk assets become,” wrote Citi analyst Scott Chronert.

With a rate cut in the rearview, all roads lead back to one key question: Are we on the precipice of an AI-fueled golden age, or the edge of a cliff?—LB

• Probably nothing: Sales of US heavy trucks are falling like the US is heading for a recession.
• Treasury Secretary Scott Bessent has claimed two primary residences in his mortgage documentation—the same thing President Trump is trying to fire Lisa Cook for.
• Amazon is getting into the AI game, launching an AI agent to assist its third-party sellers.
• Housing starts, or the number of new single-family homes being built, fell to their lowest level since May.
• Jaguar Land Rover has been forced to pause production for a third consecutive week thanks to a cyberattack.
• Quantum computing startup IonQ is going on a shopping spree.

With the Fed meeting finally out of the way, the economic calendar is looking pretty clean heading into Thursday. Only the weekly initial jobless claims report is set to drop, and given how things have been going in the labor market lately (initial claims reached a four-year high last week), economists are bracing for more bad news.

There are some signs of life in the earnings arena, however. We’ll hear from FedEx, and it should be interesting to hear how the end of de minimis exemptions is affecting the shipping giant’s bottom line; as well as Olive Garden parent company Darden Restaurants, and homebuilder Lennar.