Federal Reserve Delivers Third Rate Cut This Year; Market Braces for Minimal 2026 Action After FOMC Date Decision

The Federal Reserve completed its third consecutive 25-basis-point rate reduction in a contentious vote today, establishing the benchmark rate corridor at 3.5% to 3.75%. The decision reflected internal disagreement, with hawkish members opposing any cut and dovish voices calling for steeper 50-basis-point reductions. Despite ongoing inflation pressures above the 2% target, Fed officials project just one additional cut throughout 2026, signaling a pause-and-hold posture as labor market conditions gradually ease.

Market Reaction: Equities Show Modest Gains Ahead of FOMC Date Clarity

Major indices displayed mixed performance following the rate decision. The S&P 500 edged up +0.34%, while the Dow Jones Industrial Average climbed +0.67%, and the Nasdaq 100 remained virtually flat at -0.01%. Prior to the official FOMC date announcement, equities found footing as wage growth indicators signaled softening pressures—the US Q3 employment cost index rose just +0.8% quarter-over-quarter, undershooting the anticipated +0.9% q/q increase.

Housing sentiment showed tentative strength, with US MBA mortgage applications rebounding +4.8% for the week ending December 5. However, purchase applications dipped -2.4% while refinancing surged +14.3%, reflecting uneven borrower demand. The 30-year fixed mortgage rate inched higher by 1 basis point to 6.33%, signaling lenders’ cautious stance post-FOMC date.

Initial jobless claims are projected to climb by +29,000 to 220,000 this Thursday, potentially influencing market interpretation of labor market durability. Meanwhile, Q3 earnings season reaches its culmination with 495 of 500 S&P constituents having reported, and Bloomberg Intelligence data confirms an impressive 83% beat their forecasts—the strongest quarter since 2021, with earnings climbing +14.6% against +7.2% consensus expectations.

Treasury Yields Pivot Lower; Expectations Recalibrate on FOMC Date Outcomes

March 10-year Treasury notes advanced 2 ticks, with yields contracting 2.2 basis points to 4.166%. After touching a 3-month peak, the 10-year yield retreated as market participants absorbed the FOMC date implications. The employment cost index underperformance—a dovish signal—combined with crude oil’s descent to 2-week lows, which compressed inflation expectations and bolstered bond demand through short covering.

Position squaring ahead of the official FOMC date announcement also supported Treasury prices, though initial trading saw selling pressure as traders fretted over the divided Fed messaging and prospective extended rate-hold scenarios. Negative carryover from European Central Bank hawkishness competed for investor attention, pushing the German 10-year bund yield to an 8.75-month high of 2.895%, up 1.2 basis points.

ECB President Christine Lagarde signaled likely upward revisions to economic growth forecasts at next week’s policy session, while fellow Governing Council member Simkus stated inflation tracking near the 2% medium-term target warrants rate stability through December and beyond. Swap markets price zero probability of any ECB cut on December 18, contrasting sharply with the Fed’s recent FOMC date easing cycle.

Stock Movers: Amazon’s Grocery Expansion Pressures Delivery Rivals; Crypto Stocks Tumble

Amazon’s announcement of same-day perishable grocery delivery across 2,300+ municipalities blindsided the mobile grocery sector. Maplebear (CART) plummeted -6.0%, Uber Technologies (UBER) retreated -4.0%+, and DoorDash (DASH) fell -4.0%+, each representing significant S&P 500 and Nasdaq 100 laggards.

Cryptocurrency-exposed equities faced headwinds as Bitcoin traded near $89.18K, down approximately -1% from recent levels. Marathon Digital Holdings (MARA) dropped -3%+, while Galaxy Digital Holdings (GLXY) and Riot Platforms (RIOT) each fell -2%+. MicroStrategy (MSTR) and Coinbase Global (COIN) retreated -1%+, reflecting broader digital asset weakness following the FOMC date announcement and its implications for rate trajectory.

AeroVironment (AVAV) slumped -10%+ after trimming 2026 adjusted EPS guidance to $3.40-$3.55 from $3.60-$3.70, missing the $3.63 consensus. GameStop (GME) tumbled -6%+ as Q3 net sales declined -4.6% year-over-year to $821.0 million. T Rowe Price Group (TROW) shed -3%+ following November’s -0.2% month-over-month assets-under-management dip to $1.79 trillion.

JPMorgan downgraded Noble Corp (NE) to neutral from overweight, triggering -3%+ losses, while HSBC demoted Biogen (BIIB) to reduce from hold with a $143 price target, weighing on the stock -1%+.

Winners Build on Positive Catalysts and Analyst Upgrades

Photronics (PLAB) surged +42%+ on exceptional Q4 performance—adjusted EPS of 60 cents vastly exceeded the 45-cent consensus, with Q1 guidance of 51-59 cents also beating 46-cent expectations. GE Vernova (GEV) vaulted +9%+ to lead S&P gainers after expanding its buyback authorization to $10 billion and doubling the quarterly dividend to 50 cents. EchoStar (SATS) climbed +5%+ following Morgan Stanley’s upgrade to overweight with a $110 target, while Middleby Corp. (MIDD) gained +5%+ on Jeffries’ buy rating upgrade and $175 price objective.

Chewy (CHWY) edged +2%+ as Q3 net sales of $3.12 billion surpassed $3.10 billion consensus. PepsiCo (PEP) rose +2%+ after JPMorgan lifted it to overweight from neutral with a $164 target, and Waters Corp. (WAT) advanced +1%+ following Wolfe Research’s outperform upgrade with a $480 price objective.

International Markets Succumb to Mixed Signals

Overseas equity benchmarks retreated. The Euro Stoxx 50 declined -0.21%, while China’s Shanghai Composite closed -0.23% lower. Japan’s Nikkei 225 retreated from a 3.5-week high, finishing -0.10% lower as regional investors absorbed the FOMC date consequences and ECB policy divergence.

Upcoming Earnings Calendar

Key corporate earnings scheduled for December 10, 2025 include Adobe Inc (ADBE), Chewy Inc (CHWY), Nordson Corp (NDSN), Oracle Corp (ORCL), Synopsys Inc (SNPS), and Vail Resorts Inc (MTN).