US market opened flat on Wednesday, buoyed by continued optimism surrounding potential Federal Reserve interest rate cuts, while investors assessed a fresh batch of corporate earnings reports. The Dow Jones Industrial Average (.DJI) gained 84.9 points, or 0.19%, reaching 44,196.61. The S&P 500 (.SPX) added 10.1 points, or 0.16%, climbing to 6,309.3, and the Nasdaq Composite (.IXIC) rose 38.7 points, or 0.18%, to 20,955.22.
The Federal Reserve is widely expected to begin cutting interest rates soon, potentially as early as its September 17, 2025 meeting. Markets are currently pricing in a strong probability, between 80% and 90% of a 25 basis point cut in September, with additional rate reductions anticipated through the rest of 2025 and into 2026. By the end of this year, total cuts could amount to around 75 basis points.
The growing expectation of rate cuts is being fuelled by recent signs of economic softness. July’s weaker-than-expected job growth, stagnation in the service sector, and broader concerns about a slowing economy have increased pressure on the Fed to act. While inflation remains above the Fed’s 2% target, it has generally eased over the course of 2025, leading some officials and economists to argue that the current level of interest rates may no longer be necessary.
Internal divisions have already emerged within the Fed, two members voted for a cut during the July meeting, even though the central bank held rates steady. Fed Chair Jerome Powell has signaled a willingness to adjust policy if incoming data shows further economic weakness. However, the Fed remains cautious and data-driven, emphasizing the need to assess more inflation and labor market indicators before committing to rate reductions.