By Sabrina Escobar

The Fed Delivers. Markets ended the day on an exuberant note after the Federal Reserve gave investors the interest-rate cut they had been waiting for.

The central bank sweetened the deal by issuing a stronger-than-expected outlook for next year, and perhaps more importantly, leaving the door open for future cuts.

The S&P 500 rose 0.7% while the Nasdaq Composite gained 0.3%. The Dow Jones Industrial Average had its best Fed day since December 2023, rising 498 points, or 1.1%.

ICYMI, here's a quick rundown of everything else that happened at today's meeting:

The Fed cut interest rates by a quarter of a percentage point, in line with the market's expectations. The cut itself should give investors and economists some pause about just how joyful to be over the decision -- after all, it reflects "growing concern about the economy's underlying momentum," wrote Gina Bolvin, president of Bolvin Wealth Management Group.

"While inflation has cooled, the Fed is also acknowledging that policy lags, geopolitical uncertainty, and tighter credit conditions are weighing more heavily on the outlook," she added.

The labor market is of particular concern. At a press conference Wednesday, Fed Chair Jerome Powell said that labor market conditions were cooling "a touch more gradually" than committee members initially thought, suggesting there was further risk of a more stark deterioration ahead.

That said, officials boosted their GDP forecast for 2026 and lowered inflation expectations. They also predicted that unemployment would remain at 4.4% next year. Powell said the bank's base case was for "solid growth" in 2026.

If you're confused about the seemingly conflicting messages between cutting rates due to labor market concerns, while also predicting stronger growth ahead, you're not alone. In fact, the FOMC itself seems at odds over how best to proceed going forward.

Three committee members dissented on the cut: Fed. Gov. Stephen Miran, who wanted to cut rates by half a percentage point; and regional bank presidents Austan Goolsbee and Jeffrey Schmid, who both thought rates should stay unchanged.

This is the first time since 2019 in which three members voted against a decision, highlighting the growing rifts within a committee that, in recent history, has tended to vote unanimously. Powell said the dissents were a reflection of an unusual, "persistent" tension between the Fed's dual aims of both keeping inflation under control and ensuring full employment.

That tension is unlikely to ease in coming months. The FOMC is penciling in just one quarter-point rate cut next year, while markets expect two.

"We're not surprised to see near term optimism in the markets given that the Fed continues to cut rates even though the economy is growing, however, we think the rose colored glasses may come off once investors realize that the path to lower interest rates may take longer -- or may not materialize at all -- to the extent that they believe it will," wrote Chris Zaccarelli, chief investment officer for Northlight Asset Management.

Read our real-time coverage of today's FOMC meeting here.

The Hot Stock: GE Vernova +15.6% The Biggest Loser: Uber Technologies -5.5%

Best Sector: Industrials +1.8% Worst Sector: Utilities -0.1%

Tariff Test

As if Fed Day wasn't enough, we also have an (anti?) Tariff Day looming. It's likely that the Supreme Court will soon render a decision on whether President Donald Trump has unilateral authority under the International Emergency Economic Powers Act to impose tariffs.

We don't know when the decision will arrive, but trade experts say it's likely to be released before the end of the year -- and maybe as early as tomorrow (the Supreme Court typically issues decisions on Mondays and Thursdays).

It's also unclear which way the justices will rule. The early takeaway from November's oral arguments was that several justices were skeptical about the administration's arguments.

The ruling's implications "are huge," writes my colleague Reshma Kapadia. "A ruling against the administration would not only threaten the core of Trump's trade policy, it would also raise new questions for investors about the government's budget deficit and might trigger payments to some big companies," she adds.

Some companies, such as Costco Wholesale, have already filed lawsuits to secure their refunds in the event that the tariffs are struck down. Indeed, what the court says about refunds is one of the main questions ahead of the ruling.

Investors will also have to watch the scope of the ruling. The court could rule against the administration while keeping the impact limited.

"Is it a blanket no, or is it a situation where the Justices try to distinguish based on the underlying emergency, as they are reviewing both the fentanyl and reciprocal tariffs, which some have speculated could be treated differently," Owen Tedford, an analyst at Beacon Policy Advisors, told Reshma.

The markets will have to wait and see. Meanwhile, check out Reshma's full story here.

The Calendar

Broadcom, Ciena, Costco Wholesale, and Lululemon Athletica release earnings tomorrow.

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What's Ahead for Markets in 2026? Join Barron's virtual roundtable on Dec. 11.

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December 10, 2025 19:55 ET (00:55 GMT)

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