Fed rate cut fails to impress Wall Street

The U.S. Federal Reserve (Fed) has decided to cut interest rates by 25 basis points, to a range between 4.00% and 4.25%, for the first time since December 2024, the institution announced at the end of a two-day meeting. This is good news for Donald Trump but was already expected by the market.

Thus, the S&P 500 lost 0.1% to 6,600.42 points, while the technological Nasdaq Composite fell 0.33% to 22,261.33 points. The industrial Dow Jones rose 0.57% to 46,018.50 points.

The institution, led by Jerome Powell, has been the target of much criticism from US President Donald Trump, who has repeatedly called for a faster and more aggressive reduction in interest rates.

Jerome Powell in his speech highlighted the tension between the Fed's two mandates, with inflationary pressures persisting while labor market data weakens, meaning there is "no risk-free path" ahead, he stressed.

The US Federal Reserve (Fed) also raised its estimates for US economic growth this year, to 1.6%, compared to the 1.4% it had advanced in June.

John Lamb, Chief Equity Investment Officer at Capital Group, argues that "while a Fed rate cut could offer short-term support for stocks, it is not a guaranteed path to market gains."

"Investors should carefully evaluate the justification behind the cuts and consider the extent to which they have already been priced in," the expert warns.

"With global stocks recovering and market leadership expanding beyond the US tech sector to Europe, Japan, and emerging markets, it's crucial to avoid binary positioning," argues John Lamb.

"The expansion is also occurring at the sectoral level, with industrial sectors benefiting from trends such as increased defense spending in Europe, electrification and automation, and investment in data centers," he emphasizes.

"Rather than chasing headlines, focusing on long-term fundamentals, diversified earnings growth, and disciplined stock selection is key to navigating ongoing volatility and capturing opportunities across sectors and regions," the investment manager argues.

Robert Lind, Chief Economist at Capital Group, says that "the Fed's rate cut reflects growing signs of an economic slowdown and a tightening labor market. Job growth has clearly weakened, and unemployment has risen slightly. However, with inflation still a concern—especially with tariffs being reflected in prices—the Fed's path forward remains balanced. Further easing will likely be cautious and data-dependent."

"Although the outlook is softening, we're not yet in recession territory. We're watching the signs closely. This is a time for vigilance—not complacency—and, for investors, it's a time to navigate very selectively and carefully," he adds.

On this side of the Atlantic, European stock markets closed without major fluctuations, with the majority ending with a slightly negative balance.

Investors were eagerly awaiting the Fed's monetary policy decisions, which will be announced at 7 p.m. in Lisbon and are expected to be reflected across Europe tomorrow.

The technology sector was the most buoyant, despite rumors revealed by the Financial Times that the Chinese regulator had ordered the country's largest technology companies to stop buying all Nvidia artificial intelligence chips and to close their existing orders.

The PSI started the day with losses, counter-cyclically with Europe, and ended the third trading session of the week with a drop of 0.10% to 7,729.87 points.

Leading the losses were Galp Energia (-2.13% to 15.86 euros), NOS (-1.16% to 3.85 euros) and REN (-0.85% to 2.93 euros).

On the other hand, Mota-Engil (+1.47% to 5.17 euros), EDP (+0.87% to 9.90 euros) and EDP Renováveis ​​(+0.60% to 3.86 euros) stood out on the positive side.

European stock markets closed mixed on the day when the US central bank's monetary policy decision was expected.

The Stoxx 600 fell moderately, 0.03% to 550.63 points and the EuroStoxx 50 lost 0.05% to 5,369.7 points.

The DAX rose 0.13% to 23,359.2 points. London followed suit, with the FTSE 100 advancing 0.14% to 9,208.4 points and Amsterdam gaining 0.36%.

In a counter-cycle, the CAC-40, in Paris, lost 0.4% to 7,786.98 points, the IBEX in Madrid fell 0.24% to 15,127.2 points and the FTSE MIB in Milan led the losses, falling 1.29% to 41,954.98 points.

The price of a barrel of Brent for delivery in November ended today on the London futures market down 0.76%, to $67.95.

Also noteworthy is Deutsche Bank's estimate that gold will average $4,000 per ounce in 2026, with the Fed's price cuts.

The euro fell slightly against the dollar on a day when a decision on interest rates from the US Federal Reserve (Fed) is expected.