At midday on Wednesday, U.S. stocks showed mixed performance, with the Dow Jones Industrial Average rising 200 points as investors awaited the Federal Reserve's interest rate decision. Market sentiment remained cautious, with attention turning to sector rotation after the Russell 2000 index hit a record high the previous day.
The Dow climbed 228.13 points, or 0.48%, to 47,788.42, while the Nasdaq Composite dipped 41.26 points, or 0.18%, to 23,535.22. The S&P 500 edged up 6.28 points, or 0.09%, to 6,846.79.
Investors are closely watching the Fed's final meeting of the year, where policymakers are widely expected to deliver a third consecutive 25-basis-point rate cut, with CME's FedWatch tool pricing in a 90% probability. However, divisions persist among Federal Open Market Committee (FOMC) members, with some advocating for cuts to support the labor market and others concerned about reigniting inflation.
Kevin Thozet of Carmignac's investment committee noted, "The Fed is deeply split, nearly evenly divided between six members favoring cuts—including two with 'Make America Great Again' leanings—and six preferring to hold rates steady." He added that Chair Jerome Powell might pair a 25-basis-point cut with more restrictive language to balance dovish and hawkish factions.
Market participants are scrutinizing the Fed's statement and Powell's press conference for clues on future policy. Fiona Cincotta of City Index highlighted focus on the dot plot, questioning whether it will align with market expectations of two cuts or stick to September's projection of one.
On Tuesday, the S&P 500 slipped 0.1%, and the Dow fell nearly 0.4%, dragged down by JPMorgan Chase, while the Nasdaq eked out a 0.1% gain on strength in Broadcom, Tesla, and Alphabet. Notably, the Russell 2000's record high signaled potential sector rotation, as small caps—more sensitive to rate cuts due to their borrowing costs—outperformed.
Wells Fargo's Doug Beath observed that the Russell 2000, though lagging the S&P 500 year-to-date, has rebounded since November 21, reflecting broadening market participation. He tied this to expectations of 2026 economic acceleration, fueled by tax cuts, deregulation, further Fed easing, and sustained tech capex.
Oracle's upcoming earnings report is under scrutiny, with its AI investments and cloud infrastructure risks in focus. Pepperstone's Chris Weston noted options markets pricing in a potential 10% earnings-day swing.
Meanwhile, the 10-year Treasury yield rose 2 basis points to 4.20%, a high since early September, as global markets increasingly price in the end of the rate-cut cycle.
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