Stocks Hold Near Record As Bonds Pare Drop On Fed: Markets Wrap

Wall Street traders left stocks near record highs as bonds pared losses after the Federal Reserve kept rates on hold and downgraded its economic view, bolstering hopes officials will soon be able to ease policy. The dollar rose for a fifth straight day.

The S&P 500 edged up. The yield on 2-year Treasuries was little changed at 3.88%.

The Federal Open Market Committee voted 9-2 on Wednesday to hold the benchmark federal funds rate in a range of 4.25%-4.5%, as they have at each of their meetings this year. Governors Christopher Waller and Michelle Bowman voted against the decision in favor of a quarter-point cut.

“Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year,” officials said in a post-meeting statement. The Fed had previously characterized growth as expanding “at a solid pace.”

Attention will soon turn to Jerome Powell’s press conference at 2:30 p.m. in Washington. With an onslaught of data due before the September meeting, the Fed chair may opt to leave his options open until there’s more clarity about the direction of the economy.

Inflation-adjusted gross domestic product rose an annualized 3% in the second quarter. As solid as the pace was, growth averaged 1.25% in the first half, a percentage point cooler than the pace for 2024. Consumer spending advanced 1.4%, the tamest growth in consecutive quarters since the pandemic.

Earnings season for a handful of megacap tech firms has morphed into capex season with the AI arms race showing no signs of slowing.

Focus will be on how much the behemoths Microsoft Corp. and Meta Platforms Inc. plan to dish out to keep up with competitors like Alphabet Inc. and Amazon.com Inc. as they build out infrastructure and software to power artificial intelligence applications.

The S&P 500, coming off its best streak of gains since 2020, is about to enter what has historically been its toughest stretch of the year.

Over the past three decades, the benchmark has performed the worst in August and September, losing 0.7% on average in each month, compared with a 1.1% gain on average across other months, data compiled by Bloomberg show.

Though equities have likely not peaked this year, we see limited upside given the historically high multiples at which market-leading stocks are trading, according to Chris Brigati at SWBC. 

“We are entering a seasonal period of weakness for the market suggesting a fall pullback may be on the horizon before the next move toward higher stock prices in 2026,” he said.

The US stock rally has been fueled by retail traders, while institutional buying has been more measured, according to Barclays Plc strategists led by Emmanuel Cau.

Wells Fargo Investment Institute is raising its year-end forecasts and target ranges for US equities this year and next, saying tariff delays and deregulation are poised to keep driving the stock market higher. 

The firm sees S&P 500 closing 2025 at a 6,400 midpoint — roughly where US benchmark is currently trading — and 2026 at a 7,000 midpoint.

“While we expect equities to advance over the next 12 months, investors should be mindful of potential market swings in the coming weeks,” said Mark Haefele at UBS Global Wealth Management.

The market’s next catalyst is likely to be continued progress on trade, Brigati noted.

Trump touted landmark agreements with Japan and the European Union in the past week, adding to pacts with a handful of smaller economies. An extension of the US-China tariff truce is also in the works. 

“Meaningful progress with the China trade negotiations would remove a significant headwind for markets,” Brigati said.

The US president said he would impose a tariff rate of 25% on India starting on Aug. 1 and suggested he would add an additional penalty over the country’s energy purchases from Russia.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 2:03 p.m. New York time

• The Nasdaq 100 rose 0.3%

• The Dow Jones Industrial Average was little changed

• The MSCI World Index was little changed

• Bloomberg Magnificent 7 Total Return Index rose 0.1%

• The Russell 2000 Index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%

• The euro fell 0.6% to $1.1483

• The British pound fell 0.4% to $1.3291

• The Japanese yen fell 0.2% to 148.81 per dollar

Cryptocurrencies

• Bitcoin was little changed at $117,453.51

• Ether rose 0.5% to $3,782.9

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.34%

• Germany’s 10-year yield was little changed at 2.71%

• Britain’s 10-year yield declined three basis points to 4.60%

• The yield on 2-year Treasuries was little changed at 3.88%

• The yield on 30-year Treasuries advanced four basis points to 4.89%

Commodities

• West Texas Intermediate crude rose 1.5% to $70.25 a barrel

• Spot gold fell 0.8% to $3,300.54 an ounce