MW How stocks usually react to December Fed days - and why Powell's final meeting of 2025 could be different

By Christine Idzelis and Gordon Gottsegen

The S&P 500 was struggling for direction Wednesday ahead of the Fed's rate decision

Stocks are likely to get choppy later today when Fed Chair Jerome Powell's press conference starts.

Investors were bracing for the Federal Reserve's final interest-rate decision of 2025 on Wednesday, with history showing that the S&P 500 index has tended to see a modest gain on Fed days in December.

Going back to 2000, the S&P 500 SPX has gained an average of roughly 0.2% on December Fed days, with a median gain of 0.1%, according to Dow Jones Market Data. Last December was an outlier, though, with stocks and bonds selling off after the Fed released a new set of economic projections that pointed to a potentially slower pace of rate cuts than previously forecast.

The outcome of the Fed meeting last December marked the largest decline for the S&P 500 on any Fed day that month since 2000, according to Dow Jones Market Data. New "dot plot" projections for the potential path of interest rates are due this afternoon.

Fed Chair Jerome Powell has tended to throw markets into "a tizzy" on Fed days, according to a team from Bespoke Investment Group, who noted that much of Powell's tenure has been marred by steep sell-offs in the final hour of trading on Fed days.

Lately, however, S&P 500 swings have been less volatile on the days the central bank announces its decision on rates. The Fed will announce its rate decision at 2 p.m. Eastern time, with all eyes on Powell's press briefing on monetary policy, which is expected to start at 2:30 p.m.

Investors widely expect the Federal Open Market Committee to cut the Fed's benchmark rate, and they will be watching closely for guidance on the path of rates in 2026, as well as for any signs of division among voting members of the FOMC.

"Market volatility on Fed days has plummeted lately," Bespoke said in a note Wednesday. Over the last five Fed days, the S&P 500's average one-day change has been just 0.14% up or down, with recent strength in the final hour of trading being "the complete opposite of what we've seen across Powell's full time as Fed Chair."

BESPOKE INVESTMENT GROUP

Powell started his first term as chair in February 2018, and his second term will end in May 2026. Traders were favoring the odds of today being Powell's final rate cut at the helm of the central bank, according to the CME FedWatch Tool.

"The consensus heading into today's FOMC decision is that we'll get a 25 basis point rate cut, but that it will be some sort of 'hawkish cut' with Chair Powell putting the brakes on more cuts for now," the Bespoke team said.

The S&P 500 was struggling for direction in late morning trading Wednesday, according to FactSet data, at last check, but it was up 16.4% on the year so far.

The Dow Jones Industrial Average DJIA was higher Wednesday, on pace for a 12.4% yearly gain, while the Nasdaq Composite Index COMP was slightly lower but heading for a 21.8% gain in 2025.

-Christine Idzelis -Gordon Gottsegen

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 10, 2025 11:53 ET (16:53 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.