(These are the market notes on today’s action by Mike Santoli, CNBC’s Senior Markets Commentator. See today’s video update from Mike above.) A typically erratic market response to the as-expected 25-basis-point rate cut from the Fed , which came with a median committee member outlook for two more such cuts this year, but without the fully dovish dismissal of inflation concerns that the most bullish traders might have been looking for. The reflex trade was a textbook Fed-easing play to rotate out of big, expensive growth stocks and into lower-quality, more cyclical small-caps and financials . But the trade has wobbled already. Fed Chair Powell in his press conference continued to accentuate the “two-way risk” both to the Fed’s inflation and full-employment mandates, making markets a bit antsy in the first hour following the decision. Treasury yields reversed higher as the market digested the broad outlook articulated in the “dot plot” projections for several more rate cuts through next year even as PCE inflation is now projected to be slightly higher than was estimated three months ago. When one considers the makeup of the Fed board will likely be more dovish as time goes on after President Trump appoints more members, the “run it hot” scenario gains more traction. The absolute level of yields is unthreatening, but Treasury holders were selling after a strong rally as the horizon clouds up a bit. Big picture, the stock market has been grinding higher in a sturdy trend, though with some fatigue below the surface. The tape is trying to repair some imbalances on the fly, trimming back overbought Magnificent 7 names, bidding for the median stock ( equal-weight S & P 500 outperforming ), staying focused on the AI and earnings-growth themes, while repeating the history of positive performance after past Fed rate cuts occurring when stocks were already at a record high. Backdrop is a fully priced S & P 500 and Nasdaq-100 back at their high forward P/Es for the current bull market of 23 and 28, respectively, supported by tight credit spreads, another round of hoped-for soft-landing rate cuts, ferocious AI capex spending and buoyant spending by upper-income consumers thanks to a robust wealth effect. This is the setup, as is the fact that late-September can still be rocky, and even after past bull-market rate cuts the near-term market response has been iffy and average. (Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here .)
