Fed Cuts Rates, Markets Hit Records, Shutdown Looms

Last week felt like watching your favorite sitcom get renewed for another season – the Fed delivered its expected quarter-point rate cut, markets hit new records for three straight days, and everyone forgot about inflation for about five minutes. This week brings us back to reality with potential government shutdown theatrics that could make even the most dramatic Netflix series look tame.

Past Week's Market Scorecard

The S&P 500 closed Friday at 6,643.70, up 1.25% for the week despite a modest 0.59% Friday gain that felt more like a gentle pat on the back than a victory lap. The Dow Jones Industrial Average finished at 46,247.29, gaining 1.10% over five days, while the tech-heavy Nasdaq Composite stole the show with a 2.2% weekly surge. Bitcoin decided to play it cool, ending near $109,655 – down slightly from the week but still maintaining its "digital gold" swagger with a 66.67% year-over-year gain. The ten-year Treasury yield ticked up to 4.20%, reminding everyone that the bond market doesn't always dance to the Fed's tune. Like watching Taylor Swift announce surprise album tracks, markets seem to be getting comfortable with this new rhythm of record highs.

Last Week’s News Headlines

Federal Reserve Cuts Rates 25 Basis Points (September 17): The Fed delivered its widely anticipated quarter-point cut, bringing the federal funds rate to 4.00%-4.25% – the first reduction since President Trump took office. This dovish pivot signals the central bank's shift from fighting inflation to supporting employment, with dot-plot projections suggesting two more cuts before year-end. Bond yields initially dipped then rose as markets digested the implications, while equities celebrated with three consecutive record-high closes. The move sets up October's meeting as another potential cut, giving markets a sugar rush that could last weeks.

Markets Hit Record Highs Three Straight Days (September 22-24): All three major indexes achieved new all-time highs for three consecutive sessions, with the S&P 500 notching its 27th record of 2025. The rally broadened beyond tech giants, with the Russell 2000 small-cap index hitting its first new high since 2021 – a sign that the "Magnificent Seven" monopoly might finally be sharing the spotlight. Trading volume surged to levels not seen since early April, suggesting genuine conviction behind the moves rather than algorithmic noise.

Nvidia-OpenAI Partnership Announcement (September 22): Nvidia announced plans to invest up to $100 billion in OpenAI's data center infrastructure, sending the chip giant's stock higher and pulling the entire semiconductor sector along for the ride. This partnership reinforces the narrative of an AI infrastructure boom that has driven tech stocks throughout the year. Taiwan Semiconductor also gained on the news, while competitors like Broadcom faced selling pressure as investors reshuffled their AI exposure.

Trump Announces New H-1B Visa Fees (September 22): President Trump unveiled a $100,000 fee for H-1B visa applications, sending Indian technology services stocks tumbling and raising concerns about tech sector labor costs. The move represents another escalation in trade and immigration policy that could reshape global tech operations. Major consulting firms and tech companies with heavy H-1B reliance may face margin pressure and operational disruptions.

Personal Income and Spending Data Beats Expectations (September 26): August personal income rose 0.4% while consumer spending jumped 0.6%, both above consensus forecasts and showing continued economic resilience. The Fed's preferred PCE inflation measure came in at 2.8% year-over-year, still above the 2% target but showing gradual moderation. This data supports the Fed's "soft landing" narrative while keeping rate cut expectations alive for October.

Ukraine Drone Strikes on Russian Energy Infrastructure (September 26): Ukrainian drone attacks on Russian oil facilities prompted Moscow to curb diesel and gasoline exports, creating supply shortages and boosting oil prices. Brent crude gained over 4% for the week, its largest weekly increase in three months, while WTI crude followed suit. The geopolitical risk premium returned to energy markets just as investors were getting comfortable with lower oil prices.

Russell 2000 Breaks Four-Year High Drought (September 22): The small-cap index finally joined the record party, hitting new highs for the first time since 2021 and gaining 2.21% for the week. This broadening of market leadership suggests that the rally is becoming more sustainable and less dependent on mega-cap technology stocks. Small-cap valuations remain attractive relative to large-caps, potentially setting up continued outperformance if economic conditions remain supportive.

Chinese Economic Data Shows Continued Weakness (September 28): China's industrial profits are expected to decline 1.7% year-over-year when released Saturday, highlighting persistent business and consumer confidence issues. The People's Bank of China kept key lending rates at record lows for the fourth straight month, reflecting ongoing economic challenges. Weak Chinese demand continues to weigh on global commodity prices and export-dependent economies.

Gold & Hard-Assets

Gold reached $3,759 per ounce by week's end, gaining 0.53% and extending its remarkable 40.32% year-to-date performance that's crushing both Bitcoin and stocks. The precious metal is experiencing its biggest annual increase since 1979, driven by Fed rate cuts, geopolitical tensions, and central bank buying. Brent crude surged to $69.67 per barrel, up 3.31% for the month as Ukrainian strikes on Russian energy infrastructure reminded markets that geopolitical risk premiums never truly disappear. Historically, gold has performed best during the six months following Fed rate cut cycles, suggesting this rally may have more room to run despite already-elevated prices.

Real-Estate Pulse

Mortgage rates defied Fed logic this week, with the 30-year fixed rate climbing to 6.67% – up 20 basis points from the previous week despite the central bank's rate cut. This counterintuitive move reflects bond market concerns about future inflation and the mortgage-Treasury spread remaining historically wide. The 15-year rate rose to 5.76% while adjustable-rate mortgages hit 7.23%, creating a challenging environment for homebuyers. Real estate investment trusts (REITs) managed modest gains for the week, but remain vulnerable to sustained higher mortgage rates that could dampen property demand and transaction volumes.

Central Bank Events

Earnings Watch

Social Sentiment Snapshot

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Market chatter on social platforms reflects cautious optimism mixed with shutdown anxiety, with retail traders celebrating small-cap breakouts while institutional voices warn about stretched valuations. Reddit's investing communities are buzzing about the Russell 2000's four-year high breakthrough, while Twitter debates whether the Fed's dovish pivot comes too late to prevent a recession. StockTwits sentiment indicators show bullish momentum in energy and gold names, though volatility measures like the VIX remain near complacent levels at 15.29.

Wine & Dine

This week's market menu pairs perfectly with a robust Cabernet Sauvignon – bold enough to handle the government shutdown drama but smooth enough to celebrate those record highs. Like a well-aged wine, this market rally has developed complexity beyond its initial tech-heavy notes, now offering hints of small-cap spice and defensive positioning that should age well through October's uncertainties.

Wrapping Up

Last week proved that markets can indeed climb a wall of worry, with record highs shrugging off everything from geopolitical tensions to stretched valuations. The Fed's rate cut provided the excuse bulls needed, but the real story is the broadening rally that finally gave small-caps their moment in the sun. This week's government shutdown theatrics and jobs report will test whether this optimism can survive a reality check. With the VIX still lounging at sleepy levels and earnings season approaching, investors seem convinced that this goldilocks economy – not too hot, not too cold, just right for rate cuts – can continue. Sometimes the best investment strategy is not overthinking the good times while they last.