Stock Market Update

[BRIEFING.COM] As expected, the FOMC voted to cut the target range for the fed funds rate by 25 basis points to 3.50-3.75%. That vote was not unanimous (also expected). It was 9-to-3, with Fed Governor Miran dissenting in favor of a larger 50-basis-point cut and Chicago Fed President Goolsbee and Kansas City Fed President Schmid preferring no change.

The directive noted that downside risks to employment rose in recent months and that inflation has moved up since earlier in the year and remains elevated.

The Summary of Economic Projections (SEP) showed a median estimate of one rate cut in 2026, unchanged from the September SEP. The median estimate for the change in real GDP was revised up to 2.3% from 1.8%; meanwhile, the median estimate for the unemployment rate held steady at 4.4%, as the outlook for PCE inflation was revised down to 2.4% from 2.6%. The longer-run neutral rate remained at 3.0%.

Today's decision also featured an announcement that the Fed will begin purchasing Treasury bills, starting December 12, to the tune of $40 billion per month before likely being "significantly reduced" after a few months, noting that reserve balances have declined to ample levels.

The initial reaction to the Fed's update has been positive but somewhat measured ahead of Fed Chair Powell's press conference. The purchase of Treasury bills and sticking with a median estimate of one rate cut for 2026, while clearly not expecting any economic slowdown or any pickup in inflation, have been placating influences for a market braced for a rejoinder that there might not be another rate cut for an extended period.

Perhaps Fed Chair Powell will deliver that message, but for now, the market looks content that the message so far about the forward view isn't decidedly hawkish-minded.

The Russell 2000 is up 0.8%, the Dow Jones Industrial Average is up 0.5%, the S&P 500 is up 0.2%, and the Nasdaq Composite is down 0.2%.