Also Read: Stock Market News: Record Highs, Federal Reserve actions, and Stocks to Pick
The Federal Open Market Committee has cut its interest-rate by 25 basis points(Federal Reserve Rate Cuts) to a target range of 4.00%-4.25 for the first time since December 2024. This much-awaited decision was precipitated by indications of a weakening in the labour market: an increase in job creation has decelerated, the unemployment rate has been creeping up, but overall at a very modest pace. Fed Chair Jerome Powell termed the action as risk management – that is a prudent measure to support the economy without fueling inflation.
A Lone Dissenter: the Influence of Stephen Miran
One new face in this conference was that of Stephen I. Miran, recently sworn into the Board of Governors of the Fed. He was the sole protestor as he wanted a reduction of 50 basis points instead of 25. Miran also presented more aggressive rate forecasts, when he was estimating his dot-plot, he predicted a higher rate of cutting at future meetings, which might see the policy rate anywhere below what most other officials are predicting.
Although his opinion was a lone voice, it is an indicator of mounting pressure (political and economic) to further ease. Miran is still on leave as a member of the White House, however, his appointment, close relationship, and this objection begs questions of the extent to which political politics is converging with Fed policy.
Outlook and Market Expectations of the Fed
n its release, the Fed highlighted the fact that inflation is still high but current statistics indicate that growth and labor situations have moderated. It renewed its two-fold mandate of price stability and maximum employment.
More importantly, the report on the Economic Projections issued with the decision is indicative that more rate cuts will be made this year – probably two new 25-bps cuts (October and December) but not unanimous. In the meantime, most analysts consider that by 2025, the Fed will be moderately cautious through to 2026 balancing inflation risks and labor market softness.
A recent forecast estimates the rate at the end of 2026 to be approximately 3.6, which means that further rate reductions are limited to a few more than the current officials are indicating.
Market Response: Unstable, Split Signals
The stocks responded with a divided opinion. S&P 500 and Nasdaq were slightly at the forefront of the slight loss, whereas the Dow Jones and small-cap Russell 2000 recorded positive gains. The reaction was varied also in the overseas markets and emerging markets: some such as India rose on the anticipations of foreign capital flows as it would turn to improve amidst the improved U.S. monetary conditions.
Interest rates (Treasury yields), U.S dollar and commodities all reacted, some of them positively, indicating that the cut was anticipated, what was more important was the tone and the projections by the Fed. There is the issue of inflation; the Fed clarified that it would be on guard. Powell emphasized that setting rates is now a meeting-to-meeting business, which is sensitive to incoming data.
Stock Spotlights: SoundHound, Tesla, Netflix
Below are the new positions of the three individual stocks listed in the video, and with new data.
| Stock | What Recent Data Adds |
| SoundHound AI (SOUN) | Recent performance was high: SOUN has recorded growth in revenue of 217 per cent as compared to the previous year, which exceeded estimates and reduced loss. The firm increased its annual revenue estimates to 160M-178M. Analysts are still bullish with a “Buy”/Moderate Buy with some reservations: 12-month price averages will be about 14.50-15.30, slightly higher than current levels. The stock has been performing well technically in the recent past but it is volatile. |
| Tesla (TSLA) | Wider technology stock action confirms that point: as rate cuts drive sentiment to growth stocks, and pressure valuations, Tesla is vulnerable to interest rate expectations. According to some more recent reports, future Fed action may provide Tesla with some assistance, although the pace could slow, particularly with a potential inflation surprise or any type of regulatory risk appearing. In the sources that I have read about Tesla, no particular new target was specified in the same detail as SoundHound or Netflix. |
| Netflix (NFLX) | Recent analyst action supports that: Loop Capital increased its price target to a solid $1,350, justifying the move as Netflix is performing well in the streaming business, the company has great user retention, and Netflix has an effective content pipeline. The technical analysis indicates resistance at 1,210-1,221, and the support levels are not too far below that. Breakout and resistance Breakout above resistance may lead to an increase in the upside, failure may lead to a pullback or consolidation. |
Risks, Opportunities and What to watch
The following are some of the key levers which may or may not ensure how powerful this easing process and market rally may be:
- Inflation Surprises Despite these indicators of a cooling, inflation, particularly due to services or labour pressures would lead the Fed to make further cuts later or even freeze. CPI, PCE, growth in wages, and inflation expectations are under the scrutiny of markets.
- Labor Market Data The move by the Fed was pegged on reducing the terms of labor. Unless job reports, payroll growth or unemployment persist in displaying stress, that may put the Fed back on a tight policy course. On the other hand, further weakening may compel more drastic reductions.
- Fed Communications The dot-plot projections, the press-conferences of Powell, any suggestion of political pressure will come under heavy criticisms. The opposition of Miran gives an alert that there is mounting pressure internally to ease more, however, it is yet to determine whether this will be a majority opinion.
- Sector Rotation and Valuation Easing is usually inclined to growth and tech stocks, however, it is still reasonable. The lower the rates, the more attention may be paid to risky, high-multiple stocks (such as SoundHound), but with their negative side, in case of not meeting expectations. On the other hand, the cyclical industries (financials, industrials, housing) may find favor to lower rates and better demand, provided the economic growth continues.
- Global Effects and Currency Reduce in interest rate of US dollar; may favor the emerging markets yet expose them to risks (capital flows, trade dynamics, policy changes). In addition, the pressures of the world demand and supply chain are significant to both inflation and corporate revenue.
Bottom Line
The Fed rate reduction is an indication that the Fed priority is changing to a greater emphasis on supporting the employment and economic risk control instead of combating inflation. The markets appear to anticipate that this year will see two further cuts, with some more leeway in 2026 on the basis of the development of inflation and labor indicators. Stocks such as SoundHound and Netflix have fairly constructive structures, with varying risk profiles: Netflix is more stable and established and SoundHound has more upside but more volatility and execution risk. Tesla is stuck in the middle between those who are highly optimistic about technology and macroeconomic factors.
When you are playing the game today, it can be wise to have a balanced approach: go bold but have some dry powder in case the Fed surprises you. Monitoring the flow of incoming information, particularly inflation, wages and employment, will be vital in predicting the actual direction of the Fed next.
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