MPC Morning Call 18th September – Highly anticipated Fed rate decision underwhelms investors

Overnight – Highly anticipated Fed rate decision underwhelms investors

After a highly anticipated wait for the Fed rate announcement, stocks did very little overnight as Jerome Powel delivered 25bps and the FOMC signalled 2 more cuts this year.

The Federal Reserve lowered interest rates by 0.25% on Wednesday, its first cut in nine months, and signaled the likelihood of two additional reductions this year. The move reflects policymakers’ growing concern over signs of weakness in the labor market, which they view as a greater threat to economic stability than inflation, which remains above target. Updated projections showed a median forecast of three cuts in 2025, though analysts noted support for this outlook among Fed members remains fragile and could easily shift.

In corporate earnings, General Mills shares slipped after the company maintained its annual guidance but reported a 16% decline in North American volumes, highlighting slowing demand for packaged foods. The decline stoked worries about consumer spending trends, especially against a backdrop of tariff-driven uncertainty. Recent consumer sentiment data also reflected growing caution, with many households voicing concern about the economic pressures weighing on their budgets.

Other notable market movers included Apple, which saw a 6% drop in China smartphone sales in the weeks leading into its iPhone 17 launch, a sharper-than-usual pre-release slowdown. Lyft’s stock jumped while Uber’s fell following news of Lyft’s autonomous ride-hailing partnership with Waymo, set to launch in Nashville in 2026. Workday gained after activist investor Elliott Management disclosed a $2 billion stake and expressed support for management.

China has banned its largest tech firms, including Alibaba and ByteDance, from buying and testing Nvidia’s AI chips designed for the Chinese market, prompting disappointment from Nvidia’s CEO and causing a drop in the company’s stock price; the move escalates U.S.-China tech tensions, pushes Chinese companies to accelerate domestic AI chip development, and highlights Beijing’s efforts to reduce reliance on American technology. Baidu surged as investors grew more confident in its AI chip initiatives amid China’s broader push for semiconductor independence.