S&P 500 Dips as Fed Unveils First Rate Cut of 2025

Lead: The S&P 500 fell 6.41 points, or 0.10%, to close at 6,600.35 on Wednesday as investors digested the Federal Reserve’s first 25-basis-point rate reduction of the year and signaled further easing ahead.

Nut Graf: Following two consecutive days of losses, the benchmark equities index slipped from record highs after Fed Chair Jerome Powell described the cut as a “risk management” move amid a softening labor market. With markets pricing in two additional quarter-point cuts by year-end, traders remain wary of the central bank’s balancing act between sustaining growth and curbing inflation.

Fed’s Policy Shift Weighs on Stocks

The two-day rate-cut decision, expected by investors, briefly buoyed the S&P 500 before profit-taking emerged, leaving the index off 0.23% from its record close earlier in the week. The Dow Jones Industrial Average climbed 0.6%, while the Nasdaq Composite slipped 0.3% in choppy trading.

Powell Flags Labor-Market Risks

At his post-decision press conference, Powell highlighted growing downside risks to employment, stressing that further cuts would depend on more severe labor-market weakness and persistent inflation pressures. His comments tempered initial enthusiasm for aggressive easing.

Market Breadth and Sector Movers

• Advancers outnumbered decliners on the NYSE by a 3.1-to-1 ratio; on the Nasdaq, the ratio was 2.3-to-1.
• Technology and growth stocks led declines, with Nvidia slipping nearly 3% after reports of China curbing orders for its AI chips.
• Defensive sectors, including utilities and real estate, outperformed as bond yields fell.

Outlook: Eyes on Dot Plot and Economic Data

Investors will focus next on the Fed’s updated “dot plot” projections and upcoming September housing starts and building permits data. With the S&P 500 up over 12% year-to-date, markets are evaluating whether the easing cycle can sustain the broader rally or fuel renewed volatility.