Stocks set to roar following first rate cut of 2025

U.S. stock futures climbed on Thursday, suggesting that Wall Street is ready to push deeper into record territory after the Federal Reserve lowered interest rates for the first time in 2025 and suggested more cuts are on the way.

The S&P 500 looked set to open 0.9% higher, the Dow up 0.7%, and the Nasdaq up nearly 1.2 %. The Russell 2000, a measure of small-cap performance, rose 1.6%. The VIX, a measure of volatility, fell 6%. Gold edged down by about 0.4%.

The moves follow Wednesday’s 25 bps rate cut, which brought the federal funds rate to 4.00%-4.25%. Updated Fed projections pointed to two more cuts this year, likely in October and December.

Sober tone at the press conference

Wall Street may welcome that news, but Fed Chair Jerome Powell’s tone was sober. In his comments at the press conference, he acknowledged a weakening backdrop, saying unemployment is edging higher, “labor demand has softened,” and consumer spending has slowed this year, which has weighed on GDP growth. He described housing activity as “weak” and noted that both the supply and demand for workers are cooling at the same time.

Inflation, meanwhile, remains somewhat elevated, complicated by tariffs that he said may prove “short-lived” but could also linger. Powell called the moment “a challenging situation” where risks are shifting from inflation toward the job market, but emphasized the Fed remains in a “neutral policy stance” and is “well positioned to respond in a timely way.”

Pressed by reporters, Powell said there was “not widespread support at all” for a larger cut—only Miran, with his notable executive-branch ties, seems to have supported one —and that officials were “right to wait” until now to act. He also fielded questions about political independence, but said the Fed remains focused on its mission, will make decisions based on data, and declined to comment on the court fight over Governor Lisa Cook, calling it “inappropriate” to comment.

Powell also said that immigration shifts are curbing worker supply, and that AI appears to be reshaping the market for entry-level jobs. He noted that younger workers and minorities are being hit especially hard in what he called a “quite unusual situation,” of simultaneous declining supply and declining demand for workers.

Exuberant market set for fresh records

For now, investors appear to be brushing aside those risks. The S&P 500 closed above 6,600 for the first time on Monday, and if futures gains hold, it looks set to cross 6,700 at the open.

That reflects a market still embracing the unpalatable truth of 2025: weaker jobs numbers are seen as largely positive for corporate margins, fueling what some strategists call a “ jobless expansion .” Now lower rates—and the prospect of even lower rates—are fueling stocks’ rise, too.

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