Markets
markets
Luke Kawa

Federal Reserve cuts rates and signals end to quantitative tightening

The Federal Reserve delivered its second rate cut of 2025 as expected, taking its policy rate down 25 basis points to a range of 3.75% to 4%. Officials also said they plan to stop reducing the size of their balance sheet as of December 1.

Stocks were little changed in the wake of this announcement, but fell during the press conference when Fed Chair Jerome Powell said that there were strongly differing views on whether or not to cut interest rates again in December, and that another reduction is “far from” a foregone conclusion. The SPDR S&P 500 ETF went on to pare much of its losses after Powell suggested that core PCE inflation isn’t really too far above 2%, once one strips out how tariffs are boosting price pressures. Stocks careened lower once again after Powell said a “growing chorus” of Fed officials support skipping a cut.

Event contracts traded on Robinhood showed that a rate cut of this size was a lock for this meeting. Heading into the decision, a separate contract showed that the odds of 75 basis points in easing for 2025 were roughly 83%, implying a strong expectation that another 25-basis point reduction will be delivered at the Fed’s December meeting. The prediction-market-implied odds of no more cuts in 2025 rose to 30% from 14% by the time the press conference ended.

(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions. Event contracts trading is offered by Robinhood Derivatives, LLC, a registered futures commission merchant with the CFTC.)

It’s the first time since 1995 that the US central bank has held one of its meetings during a government shutdown, which has left monetary policymakers with less data than usual to aid in their decision-making processes.

In their statement, monetary policymakers said that the unemployment rate “remained low through August,” adding that “more recent indicators are consistent with these developments.” All in all, this does not necessarily indicate escalating concern about the state of the labor market, given that officials used the past tense to describe how downside risks to employment “rose in recent months.”

“I do wonder if officials will be comfortable cutting rates again on December 10 if they go into that meeting with no official data reflecting activity in October and November,” wrote Omair Sharif, president of Inflation Insights. “It may be hard to reach a consensus on another cut, especially given the split in the FOMC indicated in the September dot plot.”

There were two dissents at this meeting, as Kansas City Fed President Jeff Schmid preferred no change, while Fed Governor Stephen Miran wanted a 50-basis point cut.

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Toby Bochan
Market Wrap
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Markets cheer surprise gift of cooler CPI amid renewed AI optimism to finish higher

The S&P 500, Nasdaq 100, and Russell 2000 surged on Thursday — perhaps we’ll have a Santa rally after all!

Two Men Holding Gifts
CAMARILLO, CA FEBRUARY 09: A cannabis farm worker de-leafs cann

Trump signs executive order expediting reclassification of marijuana as a less dangerous drug

Rescheduling would lift regulatory pressures that have been weighing on US cannabis operators’ margins. Shares of weed companies, many of which don’t sell cannabis in the US, tumbled an hour before the executive order was signed.

J. Edward Moreno7h
markets
Max Knoblauch

Rivian climbs as it rolls out a “universal hands-free” update and scores an upgrade from Baird

Shares of EV maker Rivian are on pace for their 10th best day of 2025 on Thursday, following an upgrade from Baird to “buy” from “hold” and the rollout of its new hands-free driving update.

Baird raised its price target on Rivian nearly 79% to $25, writing that “2026 is the year of R2.”

Meanwhile, Rivian says its new hands-free feature will allow drivers to take their hands off the wheel across 3.5 million miles of US and Canadian roads.

Despite referring to it as “universal hands-free” driving, the EV maker says the feature will not stop or slow for traffic lights or stop signs, follow navigation systems, or make turns, and will function only on roads with visible lane lines.

Rivian revealed the update at its AI Day last week, when it also hinted at a robotaxi plan.

Rivian rolls out new 'Universal Hands-Free' driving feature | TechCrunch

Rivian rolls out new 'Universal Hands-Free' driving feature | TechCrunch

Meanwhile, Rivian says its new hands-free feature will allow drivers to take their hands off the wheel across 3.5 million miles of US and Canadian roads.

Despite referring to it as “universal hands-free” driving, the EV maker says the feature will not stop or slow for traffic lights or stop signs, follow navigation systems, or make turns, and will function only on roads with visible lane lines.

Rivian revealed the update at its AI Day last week, when it also hinted at a robotaxi plan.

markets
Matt Phillips

The stock market loves your rising electricity bill

Utilities with a footprint in the massive PJM Interconnection, the country’s largest power grid, were up Thursday after prices set in a key auction hit a record high of $333.44 per megawatt-day.

Such power providers, including Talen Energy, Constellation Energy, and Vistra, saw tidy gains shortly before midday.

“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,” Stu Bresler, set to become PJM’s chief operating officer next month, told Reuters.

As I’ve previously mused, political pushback from high power prices, partially created by the AI boom, could become a constraint on development of such sites. Democrats in the US Senate are now calling for hearings on the issue.

It’s fertile political soil. This morning’s US CPI report for November showed electricity prices up nearly 7% year over year, the highest since the tail end of the postpandemic inflation in April 2023.

Costs on Key US Grid Hit New Record, Testing Affordability

Costs on Key US Grid Hit New Record, Testing Affordability

“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,” Stu Bresler, set to become PJM’s chief operating officer next month, told Reuters.

As I’ve previously mused, political pushback from high power prices, partially created by the AI boom, could become a constraint on development of such sites. Democrats in the US Senate are now calling for hearings on the issue.

It’s fertile political soil. This morning’s US CPI report for November showed electricity prices up nearly 7% year over year, the highest since the tail end of the postpandemic inflation in April 2023.

markets
Luke Kawa

Micron’s earnings, soft inflation, and OpenAI valuation chatter revive speculative AI trade

The three biggest news events since markets closed yesterday are all helping spur a big bounce-back for the more speculative companies tied to AI:

  • Micron’s eye-popping Q2 guidance reaffirmed beyond a shadow of a doubt how hot AI demand continues to run in the near term.

  • While the data is undoubtedly messy, core CPI inflation decelerated by much more than anticipated in November. Lower rates are a clear positive for more marginal companies levered to the AI theme, whose stocks trade with a higher embedded risk of default and whose bonds have also been suggesting more credit risk as of late.

  • OpenAI reportedly getting its hands on more money (and commanding a higher valuation in the process) provides some semblance of valuation support for these firms and also a better fundamental foundation as well: more cash in CEO Sam Altman’s pockets means more cash he has to make good on commitments to OpenAI’s many suppliers.

Put together, the key news items since Wednesday’s close are producing massive gains for the likes of Bloom Energy, Cipher Mining, POET Technologies, CoreWeave, IREN, and Nebius.

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