"U.S. economic data keeps coming back stronger than expected, and frankly it's raining on the parade for markets. For the majority of 2025, investors have been hankering after multiple base interest rate cuts from Jerome Powell and the Federal Open Market Committee (FOMC), knowing it would kickstart cheaper borrowing and foster economic activity. The general consensus was that once the Fed was confident enough to start cutting, it would spell a change in the weather: A move toward the greatly-anticipated "normalization" of the funds rate."
"Markets continued to struggle yesterday-the third day in a row-with Deutsche Bank's Jim Reid noting: "The main catalyst was a strong batch of U.S. data, which meant investors dialled back their expectations for rapid Fed rate cuts, and pushed front-end Treasury yields higher. So that meant rate-sensitive sectors like tech took a hit, with the Magnificent 7 dragging down the broader equity market.""
U.S. economic indicators have come in stronger than expected, undermining market hopes for multiple Federal Reserve rate cuts in 2025. Weekly jobless claims declined to 218,000 and Q2 GDP rose at a 3.8% annualized rate, indicating resilient growth while inflation remains near 3%, above the Fed's 2% target. Strong data has driven up front-end Treasury yields and pressured rate-sensitive technology stocks. Investors had priced in further cuts after the September FOMC cut, but ongoing economic strength narrows the path to sustained easing, prompting market recalibration and volatility across equities. Analysts and fund managers are reassessing interest-rate expectations and portfolio positioning.
Read at Fortune
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