Will stock markets tip over amid fears of Fed dithering on rate cuts? FOMC meeting minutes are in focus.

• Wall Street looks soggy despite upbeat results for the Q4 earnings season
  
• Markets pressing for more rate cuts after mixed US jobs and inflation data
  
• January FOMC meeting minutes may send stocks lower as the Fed dithers

Selling pressure continued to build last week on Wall Street. The bellwether S&P 500 stock index shed 1.5%, marking the biggest drop since mid-November. The tech-tilted Nasdaq 100 fell 1.4%.

These losses came despite seemingly upbeat results from the ongoing stream of quarterly earnings reports. FactSet reports that earnings growth for S&P 500 firms is tracking at 13.2% year-on-year for the fourth quarter, up from 8.3% previously. Technology companies are outperforming, with growth up to 30.7% year-on-year from 25.8% prior.

Stocks struggle to make good on solid earnings reports. What’s wrong?

Moreover, despite loud worries about fizzling forward momentum in the AI-powered tech sector, those companies’ Q4 reporting has surprised on the upside of analysts’ forecasts. So far in this reporting season, their earnings and revenue figures topped estimates by 8.3% and 3%, respectively.

Traders’ reluctance may come discomfort the latest on the economic data front. The belated release of January’s US labor market data left traders scratching their heads. At first blush, the numbers appeared to be impressively strong. However, shocking revisions of two years of previous data made for sobering reading.

Payrolls growth nearly doubled economists’ bets with a gain of 130,000 jobs and the unemployment rate unexpectedly fell to 4.3%. However, the jobs growth tally was revised from 2 million to 1.5 million for 2024. More jarring still, the already-modest rise of 584,000 jobs for 2025 was slashed to a meager 181,000.

Markets lean into Fed rate cut bets after US jobs, inflation data

Consumer price index (CPI) data was a similar let-down. Headline inflation cooled to 2.4% year-on-year in January, the slowest since May. Core price growth excluding volatile food and energy prices ticked down to 2.5%, a level unseen since May 2021, before price growth ramped up in earnest on the way out of the COVID-19 pandemic.

However, energy prices contributed most to disinflation. Their share to the topline CPI figure fell by 0.15 percentage points (ppt). That seems like a hard act to repeat going forward because crude oil prices have rallied since the beginning of the year. The benchmark WTI contract is up 9% so far in 2026.

For their part, the markets seem increasingly convinced that all of these mixed cues will be translated into a Federal Reserve that is too slow to cut interest rates and will thereby have to make up for a delay by acting more forcefully. They now price in 64 basis points (bps) in cuts by year-end 2027. That’s the most dovish in three months.

All eyes on January FOMC meeting minutes

Minutes from January’s meeting of the Fed’s policy-setting Federal Open Market Committee (FOMC) take canter stage against this backdrop. Speaking after the conclave, Chair Jerome Powell told reporters that while “a rate hike isn’t anyone’s base case…[the] economy has surprised us with its strength.”

Powell argued that “upside risks to inflation and downside risks to employment have diminished,” adding that “there was broad support for holding rates [unchanged in January], including among non-voters” on the FOMC. From here, he said officials are “well positioned to let the data speak to us [and will] make decisions meeting-by-meeting.”

That hardly sounds like the central bank is in a hurry. A similar readout from the Minutes document suggesting officials are resigned to wait-and-see mode seems likely to disappoint the markets as they are racing to put more rate cuts on the menu. Wall Street appears vulnerable in this scenario as risk appetite sours anew. 

Ilya Spivak, tastylive head of global macro, has over 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

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