On July 29, 2026, after a two-day meeting, the Fed left the federal funds rate target range unchanged at 5.25%-5.50%, as expected. However, the policy statement changed significantly, removing the phrase "highly attentive to inflation risks" and emphasizing "cooling labor market" and "uncertainty in economic outlook," interpreted as a strong dovish signal hinting at a possible rate cut in September.
Three Major Indexes React Differently: Dow Rises, Nasdaq Falls
After the decision, US stocks fluctuated briefly and ended mixed. The Dow rose 0.3% to 38,950, driven by financial and energy sectors; the S&P 500 edged down 0.05% to 5,210; the Nasdaq Composite fell 0.8% to 16,450, with tech stocks under broad pressure. Analysts noted that while rate cut expectations boost liquidity, some tech valuations are elevated, and markets worry that cuts may lag inflation, prompting rotation from growth to value stocks.
Tech Giants Mixed: Apple and Microsoft Diverge
Major tech stocks were mixed. Apple (AAPL) fell 1.2% on doubts over China sales; Microsoft (MSFT) rose 0.3% on Azure growth; Amazon (AMZN) fell 0.7% on margin pressure; Nvidia (NVDA) bucked the trend, up 1.5% on sustained AI chip demand. Tesla (TSLA) was flat after announcing a new model in September.
Fed Rate Path: September Cut Probability Rises to 75%
According to the CME FedWatch Tool, the probability of a 25-basis-point cut in September jumped from 60% to 75%. Markets expect up to 100 bps of cumulative cuts by end-2026. Fed Chair Powell said in the press conference that the committee is more confident about inflation returning to 2%, but needs "more data" to confirm the trend. He also noted the labor market is "no longer overheated" but no mass layoffs.
Expert Views: Rate Cut Cycle Begins but Uncertainty Remains
Wall Street analysts weighed in. Goldman Sachs Chief Economist Jan Hatzius said the Fed has paved the way for a September cut, but a surprise rise in core PCE inflation could delay action. JPMorgan strategist Marko Kolanovic warned that markets may be overpricing cuts; an inflation rebound could trigger a stock correction. Geopolitical risks (e.g., Middle East) may also affect Fed decisions.
Sector Rotation: Financials and Real Estate Gain, Techs Under Short-Term Pressure
By sector, rate cut expectations boosted financial and real estate stocks. Bank stocks like JPMorgan (JPM) rose 1.1% on easing net interest margin pressure; REITs rose 0.8%. Energy stocks were supported by higher oil prices. Conversely, tech stocks saw profit-taking, with some high-valuation growth stocks falling over 2%. Markets expect rotation from the top 7 tech stocks to other sectors.
Outlook: Focus on August Jackson Hole Central Bank Symposium
With the Fed entering a quiet period, markets will focus on the Jackson Hole Global Central Bank Symposium on August 22-24. Powell may signal a clearer rate cut then. Additionally, the July US nonfarm payrolls report on August 7 will be a key reference for the pace of cuts. In the short term, US stocks may remain volatile. Investors are advised to focus on defensive sectors and interest-rate-sensitive assets.
Investment Strategy Suggestions
- Short term: Focus on sectors benefiting from rate cuts like financials and utilities, reduce high-valuation tech exposure.
- Medium term: If a September cut is realized, gradually add growth stocks, especially AI and semiconductors.
- Long term: US stocks are at historical mid-to-high valuations; diversify to European and Asian markets to reduce risk.
Yarong Hongchai Information will continue to track Fed policy and real-time US stock movements, providing professional insights. Follow our "US Stocks Live" section for the latest updates.
