US Stocks Mixed Close Rate Cut Hopes Rise

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U.S. equities closed mixed on Friday, September 12, 2025, (U.S. closing session), with investor sentiment swayed by softer-than-expected jobs data and subdued inflation, fueling expectations of a Federal Reserve interest rate cut at its upcoming meeting on September 17. The mixed performance saw the S&P 500 end just below the flatline, the Dow Jones Industrial Average falling 273 points, while the Nasdaq 100 reached a new record high. This development follows a week of overall positive gains for major indices.

The tech sector significantly outperformed other sectors, driven largely by strong performances from individual companies and the anticipation of a more accommodative monetary policy. Tesla’s stock surged 7.4%, and Microsoft rose 1.7% after successfully avoiding a significant EU antitrust fine. These gains were key in propelling the Nasdaq 100 to its record close. In contrast, the materials and healthcare sectors lagged behind the broader market.

The market reaction reflects a growing consensus among traders that the Federal Reserve will lower interest rates by 25 basis points next week, with some even predicting a more substantial 50-basis-point reduction. This expectation stems from the recent economic data indicating subdued inflation and slower job growth, suggesting a cooling economy that might necessitate a shift in monetary policy to stimulate growth. For the week, the S&P 500 gained 1.6%, the Nasdaq 2%, and the Dow 1.1%.

The contrasting performance across different sectors highlights the nuanced impact of the economic data and the market’s anticipation of the Fed’s actions. While the positive momentum in technology underscores the sector’s resilience and the potential benefits of lower interest rates, the underperformance in other sectors suggests a more cautious approach by some investors. The strength of the tech sector, however, largely offset the weakness elsewhere, leading to positive weekly gains across major indexes despite the Friday mixed performance.

The soft jobs data and subdued inflation figures, which were the primary catalysts for the market’s shift towards expecting a rate cut, underscore the complexities of the current economic landscape. While a rate cut is generally seen as a positive stimulus for the markets, the underlying economic indicators also reflect a certain degree of economic slowdown. This creates a dynamic market environment where investors must carefully balance the potential for further growth with the risks associated with a potentially slowing economy. The market’s reaction to these conflicting signals resulted in the Friday session’s mixed performance, with the strong tech sector gains ultimately offsetting losses in other sectors.

The market’s expectation of a Fed rate cut next week is a significant development, reflecting a shift in the central bank’s policy outlook. The current consensus suggests a 25-basis-point cut, but the possibility of a larger, 50-basis-point cut remains in play. This expectation is underpinned by the recent economic data, which paint a picture of slower growth and subdued inflation. Investors are carefully watching for any further indications of economic strength or weakness that could influence the Fed’s decision. The degree of the rate cut will directly affect borrowing costs and the overall cost of capital, with significant implications for companies’ investment decisions and the broader economy.

The avoidance of an EU antitrust fine by Microsoft and the substantial gains for Tesla significantly impacted their respective stock prices and contributed significantly to the overall market sentiment, especially within the tech sector. These company-specific developments further illustrate the importance of considering individual company performance in addition to the broader macroeconomic factors when assessing market movements. The mixed market performance on Friday, therefore, is a result of multiple interacting factors, including macroeconomic data, policy expectations, and individual company news.

The events of Friday highlight the complex interplay of macroeconomic indicators and individual company performance in shaping market movements. While the anticipation of a Fed rate cut fueled optimism, the mixed results across different sectors show the market’s cautious approach to navigating the current economic landscape.

Source: Trading Economics US Stock Market Update

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