Dow Jones Industrial Average surges as Fed delivers third consecutive rate cut
- The Dow Jones climbed over 1.2% on Wednesday after the Fed delivered a third straight rate cut.
- The Dow is testing four-week highs as investors pile into bets that the Fed can be bullied into more rate cuts later.
- Three FOMC voters broke away from the pack on Wednesday, a deviation from consensus that hasn’t happened in six years.
The Dow Jones Industrial Average (DJIA) climbed on Wednesday after the Federal Reserve (Fed) delivered its third straight quarter-point rate cut, lifting the Dow by over 1.2% at its highest and nudging the S&P 500 higher while the Nasdaq hovered near flat. The move lowered the federal funds rate to 3.50%–3.75% and was paired with renewed short-term bond buying, which pushed 2-year Treasury yields down. Markets interpreted the Fed’s acknowledgment of a softening labor market as a sign it may prioritize supporting jobs, even as inflation remains a concern.
Fed's Powell: The division is between holding rates steady from here vs. cutting
Although the Fed projected only one cut for next year, Chair Jerome Powell signaled that rate hikes are essentially off the table, a stance traders welcomed. Futures markets reacted immediately, pricing in a strong chance of two or more cuts in 2026. Stocks had drifted sideways heading into this final meeting of the year, but the Fed’s decision aligned with expectations and helped stabilize sentiment. The S&P 500 (SP500) now sits less than 1% below its late-October record after rebounding from a volatile November sparked by earlier mixed Fed signals.
Fed projects only 50 bps of additional rate cuts; lifts GDP forecasts
Regional banks were standout performers, with the KRE ETF and major regional lenders jumping more than 2% as falling rates boosted hopes for stronger lending activity. The rate decision was not unanimous: for the first time since 2019, three Fed members broke away from consensus, highlighting ongoing policy uncertainty. Overall, however, the broader market still welcomed clarity that further easing is more likely than tightening.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Author
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
