Fed Rate Cut Spurs Record Rally

Federal Reserve Chair Jerome Powell speaks at a press conference after the Fed’s interest rate decision on Sept. 17, 2025. The Federal Reserve’s decision to cut interest rates by a quarter point last week, its first rate reduction of 2025, set the stage for a stock market surge. Policymakers signaled two more potential rate cuts by year’s end, bolstering investors’ hopes that an easing cycle has begun. All three major U.S. equity indexes jumped in response, each ending the week at all-time highs. The S&P 500 rose about 1.2% for the week, the Dow Jones Industrial Average 1.1%, and the Nasdaq-100 over 2%, marking the third straight weekly gain for the S&P and Nasdaq. Investors initially wavered after Fed Chair Jerome Powell characterized the move as a “risk-management cut,” but markets rebounded as the Fed’s updated projections (or “dot plot”) pulled forward expectations for additional easing. In an upbeat sign, the rally has broadened beyond mega-cap tech: growth stocks and even small-cap shares climbed as traders embraced a more dovish rate outlook. Tech giants like Apple and Alphabet notched outsized gains, lifting the Nasdaq, while robust inflows into equities reflect a strong risk appetite on Wall Street.

Inflation and Growth Data Ahead

This week’s economic calendar brings a wave of data that could influence the Fed’s next steps. On Friday, the Personal Consumption Expenditures (PCE) price index for August will be released, which is the Fed’s preferred inflation gauge. In the previous month, core PCE inflation held relatively steady after an uptick in June. The new reading will be the first since the Fed’s rate cut, giving insight into whether price pressures are continuing to ease or proving sticky. Fed officials, including Chair Powell, have emphasized there is “no risk-free path” forward in balancing inflation and employment, so any inflation surprise could sway expectations for the Fed’s two remaining meetings this year.

Earlier in the week on Tuesday, investors will parse fresh Purchasing Managers’ Index (PMI) surveys for September, which offer a timely pulse on U.S. manufacturing and services activity. By Thursday, attention turns to growth and housing indicators. The final revision of second-quarter gross domestic product is due; the last estimate revised Q2 GDP upward, confirming solid economic expansion. Also on Thursday, August durable goods orders will gauge business investment, and the weekly jobless claims report will update the outlook on the labor market’s health. Housing data arrives with August new home sales on Wednesday and existing home sales on Thursday. These indicators are noteworthy given that mortgage rates have eased slightly from recent highs. Finally, the University of Michigan’s consumer sentiment index on Friday will show how confident Americans are feeling heading into the fall. All these reports will feed into the market’s view of whether the economy is cooling enough to justify further Fed easing or if strength in growth and jobs could give the central bank pause.

Meanwhile, a host of Federal Reserve officials are scheduled to speak in the coming days, which could add further context to the data. Fed Governor Stephen Miran, the Fed’s newest member who dissented in favor of a larger cut, is set to give remarks on Monday, and on Tuesday Chair Powell will speak, alongside several regional Fed presidents. Investors will be listening for any hints on whether more rate cuts are likely at the Fed’s November and December meetings.

Corporate Earnings in Focus

Beyond macro data, a batch of notable corporate earnings reports this week could sway market sectors and sentiment. Kicking off on Tuesday, chipmaker Micron Technology reports its fiscal fourth-quarter results. Last quarter, Micron’s revenue hit a record high amid booming demand for memory chips from AI data centers. Its stock has been on a tear, recently reaching new highs, so traders will watch whether the company’s guidance on AI-driven demand can sustain the optimism. Also reporting Tuesday is AutoZone, which will provide a read on consumer auto parts spending as drivers cope with aging vehicles and higher car prices.

On Thursday, attention shifts to consumer-facing bellwethers. Costco Wholesale is set to announce earnings and sales figures. The warehouse retail giant has continued to post steady growth. In the spring, it recorded an 8% rise in sales, and investors will look for whether consumer spending is holding up amid inflation. Any commentary on pricing, membership trends, or shifting shopping patterns will be scrutinized as a gauge of household resilience. Another closely watched name is used-car retailer CarMax, reporting Thursday as well. CarMax’s results will shed light on the state of the used vehicle market and consumer credit conditions. With auto loan rates high this year, its sales and profit margins may reveal how much demand and pricing power remain for big-ticket purchases.

Several other companies rounding out the week’s earnings roster could offer insight into economic trends. Cintas (uniform services) and Accenture (consulting and IT services) report mid-week, potentially reflecting hiring activity and corporate investment in technology, respectively. In all, the mix of earnings (spanning retail, autos, tech, and services) will help investors gauge whether corporate America’s outlook matches the market’s recent optimism.

Finally, one potential wildcard for markets lies in Washington. Congress faces a September 30 deadline to pass a budget and avert a federal government shutdown. While this drama is playing out in the political arena, investors are mindful of any last-minute brinkmanship as the date nears. Historically, markets have largely taken government shutdowns in stride: stocks have typically recovered quickly after past shutdowns. Still, heightened uncertainty in Washington could inject some short-term volatility if a funding lapse becomes imminent.

Sources:

https://www.reuters.com/business/fed-lowers-interest-rates-signals-more-cuts-ahead-miran-dissents-2025-09-17/

https://www.investopedia.com/what-to-expect-in-markets-this-week-inflation-data-fed-speakers-earnings-from-micron-costco-11812859

https://www.tipranks.com/news/3-economic-reports-that-could-affect-your-portfolio-this-week-september-22-26-2025

https://www.americancentury.com/insights/government-shutdown-market-impact/