Dow Jones Industrial Average rises to retest 46,000 ahead of Fed rate call

• The Dow Jones saw hopeful gains ahead of the Fed's latest interest rate decision.
• The Fed is broadly expected to deliver a quarter-point cut, but edge case for 50 bps remains.
• Rate traders are primarily concerned about whether or not the Fed will pivot into three straight rate cuts.

The Dow Jones Industrial Average (DJIA) found some room on the high side on Wednesday, with thin volumes bolstering the major equity index back into the 46,000 handle just ahead of the Federal Reserve's (Fed) blockbuster interest rate call. The Fed is universally expected to deliver a 25-basis-point interest rate cut, with a thin margin for a 50-bps trim on the books.

Here comes the Fed

The Fed is overwhelmingly likely to meet markets in the middle and deliver a quarter-point cut on Wednesday as the employment side of the Fed's mandate overtakes the US central bank's price stability functions. US inflation, despite rotating into the higher side through the midpoint of 2025, still remains under control for the time being, and a steep drop-off in US employment figures has investors scrambling for interest rate cuts to hypothetically bolster investment lending and re-stoke hiring that has functionally stopped.

With a 25 bps rate trim functionally already a done deal, the key factor for investors will be the Fed's stance on further rate cuts through the end of the year. Rate traders have priced in over 75% odds that the Fed will deliver three straight quarter-point cuts through the remainder of 2025, and markets will be looking for a measurably dovish shift in Fed Chair Jerome Powell's upcoming post-rate-call press conference.

Rate cuts yes, but how many?

The Fed's Summary of Economic Projections (SEP), or dot plot of policymakers' interest rate expectations, also receives another update at this meeting and will have markets scrambling to see if Fed officials are leaning toward or away from the three straight expectations inked into rate futures.

Equities are overall higher in the pre-Fed hours, with megaretailer Walmart (WMT) rising 2.2% and climbing above $105.00 on expectations that lower rates will ease credit constraints on consumers, enabling Walmart customers to access deeper debt vehicles and continue purchasing goods and services at current income-to-cost ratios.

AI tech rally darling Nvidia (NVDA) took a swift hit early Wednesday, slipping 3% and falling below $170 per share after China's government ordered their domestic companies to cease purchases of Nvidia chipsets. The AI death race to invest in deeper compute power continues on in the background, and China's Nvidia ban comes just after Nvidia bent over backwards for the Trump administration, dedicating a portion of their revenues to obtain permission to sell restricted chipsets in Chinese markets.

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