Dow Jones Industrial Average tries to hold ground ahead of Fed rate call
- The Dow Jones struggled on Tuesday, giving up some ground as investors await the Fed.
- A third straight rate cut is widely expected from markets, but jitters remain.
- The Fed’s economic projections will take center stage on Wednesday.
The Dow Jones Industrial Average (DJIA) withered on Tuesday, shedding another 120 points in a second straight soft day. Rate-cut-hungry markets hunker down for the wait to this week’s hotly anticipated Federal Reserve (Fed) interest rate cut and update to the Fed’s Summary of Economic Projections (SEP).
Fed rate call remains in the crosshairs
Investors remain focused almost entirely on the Fed's December 10 interest rate decision, widely expected to deliver a third consecutive quarter-point cut. The S&P 500 (SP500) rose 0.1% and the Nasdaq gained 0.2%, while the Dow slipped slightly, falling 0.35%. Fed funds futures now imply an ~87% chance of a cut, up sharply from a month ago. Traders say the outcome of the Fed’s latest rate call, and especially Fed Chair Jerome Powell’s during one of his last rate call press conferences, could set the tone for the remainder of December as markets weigh sticky inflation, delayed economic data, and the long runway toward new Fed leadership in 2026.
Behind the immediate rate decision, analysts say markets are already starting to look toward the next phase of Fed leadership and potential changes in communication strategy after a year of volatile expectations. With the Fed’s dual mandate still challenged by uneven inflation and cooling labor dynamics, investors are watching closely to see whether policymakers can maintain an accommodative stance in 2026 or if economic conditions force a more cautious approach.
Rate-sensitive stocks gain ground on rate cut hopes
Momentum was strongest in rate-sensitive pockets of the market. The Russell 2000 hit a fresh intraday record as lower borrowing costs are seen benefiting small caps. Silver miners also surged after Silver futures touched a record high above $61 per ounce. Meanwhile, earnings and sector-specific news added pockets of strength: CVS climbed on a stronger profit outlook, and Colgate-Palmolive (CL) gained after an analyst upgrade.
Broader macro data painted a mixed picture: JOLTS job openings held steady through both September and October, but the pace of both hiring and quits slowed heading into the fourth quarter. Small business inflation concerns also spiked to their highest level since early 2023 as tariffs continue to eat away at the underside of the US economy.
Dow Jones daily chart
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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.
