Fed’s rate decision looms as markets hover near records: What to watch this week

Sun, Sep 14, 2025, 8:10 AM 6 min read

Stocks notched another week of record highs as investors bet on a Fed interest rate cut next week.

The central bank is widely expected to prioritize a cooling labor market even as sticky inflation complicates the picture, with investors overwhelmingly betting on a quarter-point cut. Futures markets put the probability at north of 90%, according to the CME FedWatch tool.

That sets the stage for a pivotal week in markets, where the Fed’s call could determine whether the rally has more room to run.

The three major indexes closed mixed on Friday, but all logged solid weekly gains. The Dow Jones Industrial Average (^DJI) rose nearly 1% for its first winning week in three weeks, while the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) turned in their best weekly performances since early August. Treasury yields hovered near recent lows, while gold (GC=F) set fresh records as markets braced for a potential Fed pivot.

Beyond the Fed, the calendar brings a weekly update on jobless claims and fresh manufacturing data, offering more signals on the strength of the economy.

Mortgage rates will also be in focus after posting their biggest weekly drop in a year this week. The average 30-year fixed mortgage rate slipped to 6.35% from 6.5% the prior week, according to Freddie Mac.

Meanwhile, earnings season is winding down, but a handful of bellwethers remain. FedEx (FDX) is the main event, as results from the delivery giant are often viewed as a proxy for the health of global trade and the broader US economy.

Investors will also get updates from homebuilder Lennar (LEN), food giant General Mills (GIS), and restaurant operator Darden (DRI). Cracker Barrel (CBRL), which has made headlines in recent weeks over its back-and-forth rebrand, rounds out a more subdued docket.

The Fed’s interest rate decision, along with Chair Jerome Powell’s subsequent press conference, will be the key economic event of the week. Alongside its policy decision, the Fed will release its quarterly “dot plot” — a snapshot of policymakers’ projections for the path of interest rates.

In June, officials penciled in two rate cuts for 2025, although the forecasts revealed a more divided committee. Seven members saw no cuts at all, compared with four in March. Powell acknowledged the divergence at the time, stressing that “right now it’s just a forecast in a very foggy time.”

Investors will be looking for more clarity this week, but the backdrop isn’t straightforward.

Tariffs are increasingly feeding into inflation after US customs duties surged to a record $29.5 billion in August following President Trump’s new “reciprocal” levies.