The Dow Jones Industrial Average (DJIA) struggled to keep its footing on Monday, kicking off the new trading week opening at record highs above 46,800. The Dow slipped early on Monday after investors briefly showed frayed nerves, but general market sentiment continues to drift into the high side.
The Federal Reserve (Fed) is still firmly on pace to deliver a follow-up interest rate cut on October 29, keeping equity markets well bid as interest rate cuts remain a key point of focus for stock traders. Key economic datapoints have been suspended or delayed as a result of the US government’s ongoing shutdown, which has extended into a second week. Lacking the latest Nonfarm Payrolls (NFP) jobs report, investors are running on the assumption that the Fed will be forced to make interest rate decisions on currently available data, which tilts in favor of more rate cuts.
It’s a rate cut market, and we’re all just trading in it
According to the CME’s FedWatch Tool, rate markets are pricing in around 95% odds that the Fed will trim interest rates by 25 basis points on October 29, the closest to a sure thing that rate futures can provide. Rate traders are also pricing in over 80% odds of a third consecutive interest rate cut on December 10, but the long end of the tail has continued to extend, and rate odds currently place a fourth cut way out in April of 2026.
The economic data docket remains relatively mid-tier this week. The Federal Open Market Committee’s (FOMC) latest Meeting Minutes will be released on Wednesday and will give investors a closer look at the Fed’s internal dialogue from its last interest rate decision. Fed Chair Jerome Powell’s avatar will also be making a public appearance on Thursday, when a pre-recorded message by the Fed head will be released during the Community Bank Conference in Washington, DC.
Dow Jones daily chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.