Stock market reaches new peak due to tech sector progress and expectations of interest rate reduction
U.S. Stocks Rally on Fed Rate Cut Expectations
U.S. stocks ended higher today, with the Nasdaq setting a new record closing high for the second day in a row. The S&P 500 and Dow Jones Industrial Average also posted gains, as expectations for a Fed rate cut at its September meeting continue to drive the market.
The Federal Reserve's potential interest rate cuts generally have a positive impact on U.S. stocks, particularly technology-related shares like Apple. Lower interest rates reduce borrowing costs for both consumers and businesses, which can boost investment and spending, thereby supporting corporate earnings and stock prices. Technology stocks often benefit because they typically depend more on future earnings and growth, which become more valuable when discount rates (interest rates) decline.
Recent market reactions show that expectations of a Fed rate cut in September 2025—amid softer inflation data and slower labor market growth—have lifted major stock indexes such as the S&P 500 and Nasdaq toward record highs. The Nasdaq, which is tech-heavy and includes companies like Apple, gained notably (1.3%) during this period of rising hopes for easier monetary policy.
However, the timing and size of rate cuts are debated among economists and the Fed itself, reflecting concerns about inflation pressures from tariffs and the labor market's health. Some experts warn that if inflation remains sticky, especially in services, the Fed might delay cutting rates, which could alter market expectations and moderate immediate stock gains.
The actual Fed decision could be heavily influenced by upcoming inflation and jobs data, which may affect the strong positive market reaction if those data signal persistent inflation risks.
In other news, President Trump announced that Apple would invest an additional $100 billion in the U.S., bringing its total commitment to $600 billion over the next four years. This investment is expected to create jobs and boost the economy.
Meanwhile, the U.S.-India trade relations are being monitored as New Delhi shelved fresh U.S. arms and aircraft purchases after Trump hiked tariffs on Indian exports to 50%. The monthly U.S. consumer price index report is due on Tuesday.
In the corporate world, shares of Expedia rose 4.1% after the company raised its annual forecast for gross bookings and revenue growth. Gilead Sciences shares jumped 8.3% today due to the company raising its full-year financial outlook.
On the NYSE, advancing issues outnumbered decliners by a 1.37-to-1 ratio, with 272 new highs and 88 new lows. On the Nasdaq, 2,442 stocks rose and 2,157 fell, with advancing issues outnumbering decliners by a 1.13-to-1 ratio. Volume on U.S. exchanges was 16.18 billion shares, compared with the 18.27 billion average for the full session over the last 20 trading days.
References: [1] CNBC. (2025, August 25). Stocks surge as Fed rate cut expectations rise. Retrieved from https://www.cnbc.com/2025/08/25/stocks-surge-as-fed-rate-cut-expectations-rise.html [2] Bloomberg. (2025, August 25). Tech stocks lead S&P 500 to record as Fed rate cut expectations grow. Retrieved from https://www.bloomberg.com/news/articles/2025-08-25/tech-stocks-lead-s-p-500-to-record-as-fed-rate-cut-expectations-grow [3] Reuters. (2025, August 25). Fed rate cut expectations lift U.S. stocks, but inflation worries linger. Retrieved from https://www.reuters.com/article/us-usa-stocks/fed-rate-cut-expectations-lift-u-s-stocks-but-inflation-worries-linger-idUSKCN25P2JN
Technology stocks, like Apple, surged due to expectations of a Federal Reserve interest rate cut, benefiting from lower borrowing costs that can boost investment and spending. As the Nasdaq, a tech-heavy index, hit record highs, the potential rate cut is seen as particularly advantageous for technology-related shares that rely more on future earnings and growth.
