Markets Waver as Powell Strikes Cautious Tone on Rate Cuts
Saturday, September 27th 2025
Global markets faced turbulence on Wednesday, with equities sliding, the U.S. dollar strengthening, and gold pulling back from record highs. The moves followed Federal Reserve Chair Jerome Powell’s measured comments about the central bank’s next steps in monetary policy.
Powell Urges Balance Between Inflation and Jobs
In his first public remarks since last week’s Fed rate cut, Powell emphasized the challenge of weighing persistent inflation risks against a cooling labor market. His comments left traders debating how aggressive the Fed might be in easing policy through the rest of the year.
Futures data from the CME FedWatch tool still priced in another potential rate cut by October, but uncertainty lingered over the Fed’s path forward.
“Equities are drifting lower on nerves around whether the Fed can deliver cuts at each meeting for the balance of 2025,” said Gene Goldman, CIO at Cetera Investment Management.
U.S. Housing Defies Expectations
Fresh economic data added to the uncertainty. Sales of new single-family homes surged 20.5% in August to an annualized pace of 800,000 units—far above economists’ forecasts of 650,000. July’s figures were also revised higher.
The data raised questions about whether the economy is too resilient for aggressive rate cuts. “A stronger housing market suggests the Fed may not need to move as quickly,” Goldman noted.
Markets now await Friday’s Personal Consumption Expenditures (PCE) report, the Fed’s preferred inflation gauge, for clearer direction.
Wall Street Pulls Back After Record Highs
After touching record levels earlier in the week, U.S. equities retreated for a second straight session.
- Dow Jones fell 171.50 points (-0.37%) to 46,121.28
- S&P 500 dropped 18.95 points (-0.28%) to 6,637.97
- Nasdaq Composite slid 75.62 points (-0.33%) to 22,497.86
Global equities also mirrored the weakness, with MSCI’s world index down 0.33%, while Europe’s STOXX 600 slipped 0.19%. Interestingly, European defense stocks gained 1.5%, buoyed by U.S. President Donald Trump’s comments suggesting Ukraine could retake occupied territory.
Dollar Gains; Gold Retreats
The U.S. dollar advanced against major peers as Powell’s remarks supported the greenback.
- Dollar Index: +0.66% to 97.87
- Euro: -0.66% at $1.1737
- Yen: Dollar up 0.83% to 148.85
- Swiss franc: Dollar up 0.54% to 0.795
- NZD: Kiwi fell 0.77% to $0.5811 after a new central bank appointment
Meanwhile, gold slipped from record highs as investors sought safety in the dollar ahead of Friday’s inflation data.
- Spot gold: -0.86% to $3,731.62/oz
- U.S. gold futures: -0.36% to $3,767.10/oz
Treasury Yields Edge Higher
Bond markets reflected cautious sentiment, with yields inching upward amid strong supply and Powell’s remarks.
- 10-year Treasury yield: 4.147% (+2.9 bps)
- 30-year yield: 4.7517% (+1.5 bps)
- 2-year yield: 3.604% (+3.4 bps), closely tracking Fed expectations
Oil and Crypto Show Strength
Commodity and digital assets told a different story:
- Crude Oil: U.S. benchmark rose 2.49% to $64.99 per barrel, while Brent climbed 2.48% to $69.31, as supply concerns from Iraq, Venezuela, and Russia fueled gains.
- Bitcoin: Added 1.36%, reaching $113,558.60.
Waiting on Inflation
Markets remain fixated on Friday’s PCE inflation report, which could tip the balance in the Fed’s next move. Until then, volatility is likely to persist across equities, currencies, and commodities as investors reassess Powell’s cautious tone.
