Stocks Skyrocket to Record Highs as Fed Set to Cut Rates Again!

28 October 2025

Fed policy: The Fed is widely expected to cut its federal funds rate by 0.25 percentage point at its Oct. 28–29 meeting, bringing the target to about 3.75–4.00% ^[1] ^[2]. Fed officials like Governor Michelle Bowman have signaled that “two more cuts” could follow later this year ^[3], and futures markets now imply roughly a 95% probability of another 25 bp cut at the meeting ^[4]. After Wednesday’s decision, the Fed may also announce an end to its balance-sheet runoff (QT) ^[5]. At the same time, policymakers are expected to strike a cautious tone. Deutsche Bank strategists note that Powell will likely “keep options open” and avoid any commitment about future moves ^[6], and markets put better than 90% odds on another cut by December ^[7].
Market reaction: U.S. equities raced to all-time highs ahead of the Fed meeting. On Monday Oct. 27, the S&P 500 closed around 6,875 and the Nasdaq Composite about 23,637 ^[8], each records. The Nasdaq jumped ~1.9% and the S&P gained ~1.2% that day ^[9], powered by gains in tech and “Magnificent Seven” stocks. For example, Qualcomm surged ~11% on news of new AI data-center chips ^[10], while Nvidia, AMD and other chipmakers also rallied ^[11] ^[12]. All five of the big tech firms reporting earnings this week (Microsoft, Meta, Google/Alphabet, Amazon and Apple) closed higher on Monday ^[13]. Even traditionally dull sectors saw strength: Morgan Stanley and Bank of America rose ~4–5% on robust results ^[14]. Traders are upbeat enough that indices have hit fresh highs (S&P’s first close above 6,800) ^[15]. Yields on the 10-year U.S. Treasury were near 4.0% as of Oct. 27 ^[16] ^[17], and Bitcoin traded near $115,000, while gold slipped modestly. U.S.–China trade news added to the lift: President Trump said on Oct. 27 he expects a U.S.–China trade deal after meeting Xi Jinping on Oct. 29 ^[18], further buoying sentiment.
Inflation and economy: Key inflation data have been easing. The September CPI rose about 3% year-on-year ^[19], cooler than analysts had feared, and recent Fed research suggests tariff-driven price pressures have moderated. An AP News report notes that “inflation remains elevated but isn’t accelerating,” suggesting no urgent need for tighter policy ^[20]. Still, inflation at ~3% is well above the Fed’s 2% goal, and most officials judge the current policy rate (4.1%) to be restrictive enough to cool prices ^[21]. Meanwhile, the labor market shows signs of softening: hiring had nearly stalled even before a government shutdown delayed data releases ^[22] ^[23], and Fed Chair Powell recently warned that the labor market has “softened pretty considerably” with “downside risks to employment” rising ^[24]. With most Oct. data unavailable (due to the shutdown), Fed watchers say policymakers will rely on the path they laid out in September – namely, cuts this month and likely in December ^[25] ^[26]. As analyst Kris Dawsey (D.E. Shaw) put it, “Imagine you’re driving in a winter storm and suddenly lose visibility… While you slow the car down, you’re going to continue going in the direction you were going” ^[27] – in other words, the Fed will probably proceed as planned rather than making a sudden change.
Fed insiders: Some Fed officials have openly urged easing. In mid-October Governor Christopher Waller said the data justify “reducing the policy rate another 25 basis points” at the end of October ^[28]. New Governor Stephen Miran (currently on leave from the White House) has pressed even harder, arguing that monetary policy “is too tight, it’s too restrictive” and warning that leaving rates high poses downside risks ^[29]. By contrast, minutes from the October meeting showed other officials expressing “lingering inflation concerns” ^[30]. Treasury Secretary Janet Yellen, speaking before the meeting, said she expects the Fed to continue adjusting policy as needed, and noted that global uncertainties and deficits are keeping long-term yields relatively high. Economists warn that without fiscal tightening, Treasury supply could keep mortgage and bond yields up even after Fed cuts ^[31] ^[32].
Mortgage and housing: Despite Fed easing, borrowing costs remain elevated. The average 30-year fixed mortgage rate is still near 6.2% ^[33], close to its year-low but roughly double the pandemic lows ^[34]. Freddie Mac reports the 30-year fixed at about 6.27% as of mid-late October ^[35], down from 6.6% in summer but far above historical norms. Freddie Mac chief economist Sam Khater says the slightly lower rates have boosted refinancing activity and – together with rising home inventory – are “creating a more favorable environment for those looking to buy a home” ^[36]. Even so, high financing costs are keeping many would-be buyers sidelined: pending home sales were down about 1.3% in September ^[37] and homes are taking longer to sell. As one ts2.Tech report notes, Fed cuts alone “have done little to ease mortgage burdens so far,” because mortgages track long-term yields, which are being driven up by big Treasury issuance ^[38].
Analysts’ outlook: Most Wall Street forecasters expect the Fed to cut again on Oct. 29 and to signal readiness for more cuts if needed. “The bulls remain fully in charge,” notes Rosenblatt’s Michael James, citing the market’s momentum after Powell’s dovish hints ^[39]. Bank analysts (e.g. JP Morgan’s Michael Feroli) say Powell will likely avoid any language that looks too hawkish; instead he’ll likely reiterate that future moves depend on incoming data ^[40] ^[41]. UBS economist Jonathan Pingle says he’ll be watching Powell’s press conference for comments on the job market – if Powell again emphasizes higher employment risks, “I think they’re on track to lowering rates again in December,” he said ^[42]. The CME FedWatch tool puts December-cut odds above 90% ^[43]. On the other hand, some strategists warn the market’s optimism could be overdone: parallels to the dot-com bubble have been drawn as AI-chip spending explodes ^[44], and if inflation unexpectedly re-accelerates or the shutdown drags on, the Fed might pause. Still, for now the consensus is that easier money and surging tech profits will keep stock prices climbing into year-end ^[45] ^[46].

Sources: Federal Reserve officials’ statements, market data and analysis from Reuters, Bloomberg, CNBC, AP and others ^[47] ^[48] ^[49] ^[50] ^[51]. (Stock prices and Fed odds as of Oct. 27–28, 2025.)

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Mateusz Kaczmarek Latest posts

A technology and finance expert writing for TS2.tech. He analyzes developments in satellites, telecommunications, and artificial intelligence, with a focus on their impact on global markets. Author of industry reports and market commentary, often cited in tech and business media. Passionate about innovation and the digital economy.

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Stocks Skyrocket to Record Highs as Fed Set to Cut Rates Again

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