On July 31, Eastern Time, the Federal Reserve announced after a two-day monetary policy meeting that it would maintain the federal funds rate target range at 4.25%-4.50% unchanged, in line with market expectations. This is the fifth consecutive time the Fed has held fire, but the statement deleted the previous wording that it lacked "greater confidence that inflation is moving sustainably toward 2 percent," which was seen as a clear dovish signal to the market. Fed Chairman Powell said at the subsequent press conference, "If the data continue to support, the September meeting could be a time to cut rates." This remark caused September rate cut expectations to heat up sharply, and the three major US stock indices rose in response, with the S&P 500 historically breaking the 6000 mark.

Market Collective Celebration: S&P 500 Breaks 6000

At the close on August 1, the three major US stock indices all rose. The S&P 500 rose 1.2% to 6014.8, closing above 6000 for the first time in history; the Nasdaq Composite Index rose 1.5% to close at 19850.6, also refreshing the all-time high closing record alongside the S&P; the Dow Jones Industrial Average rose 0.8% to 44520.3, also closing at a record high.

On the board, the market showed a broad upward trend. About 71% of S&P 500 constituents closed higher, with the energy sector leading with a 2.3% gain, followed by materials, industrials, and financials. Defensive sectors like utilities and consumer staples lagged relatively. Among tech giants, Microsoft, NVIDIA, and Google parent Alphabet rose 1.8%, 2.6%, and 1.4% respectively, while Apple and Amazon oscillated narrowly.

Notably, the Russell 2000 Index, representing small-cap stocks, rose 2.1%, hitting a 52-week high, indicating that capital is spreading from large-cap blue chips to broader segments. Analysts believe that loose expectations provide a greater boost to small-cap stocks which are more sensitive to interest rates, and the improvement in market breadth also confirms a comprehensive recovery in risk appetite.

Fed Statement Deletes Key Wording, Shifts to "Risk Management Mode"

In this meeting's statement, the Fed adjusted its wording from "will not cut rates until it gains greater confidence that inflation is moving sustainably down to 2%" to "the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks to determine whether any adjustments to the target range for the federal funds rate are appropriate." Although not directly promising a rate cut, the deletion of the "lack of confidence" wording was interpreted as opening the door for action in September.

Powell stated at the press conference that inflation data in recent months has been "encouraging," the labor market has returned to balance from previous overheating, and the current policy rate is "clearly restrictive," so there is reason to gradually ease policy provided inflation does not rebound. He also emphasized that no final decision has been made yet, "We will assess independently at each meeting."

Christian Scherrmann, US Economist at DWS Investment, commented: "The Fed is shifting from 'higher for longer' to 'waiting for confirmation before acting,' which means the balance of policy decision-making is tilting from fighting inflation to supporting employment and a soft landing."

Rate Cut Expectations Heat Up: September Probability Nears 85%, Three Cuts Possible This Year

Data from the federal funds rate futures market shows that after Powell's speech, traders priced the probability of a 25 basis point rate cut in September from 68% before the meeting to 85%, and the probability of at least three cumulative rate cuts by December also rose to over 60%. US Treasury yields fell across the board, with the 2-year yield dropping 12 basis points to 4.02% and the 10-year yield falling slightly 3 basis points to 4.15%, further narrowing the yield curve inversion.

The US Dollar Index fell back nearly 0.5% to 104.2, providing support for non-US currencies and gold. Spot gold climbed above $2,450 per ounce at one point, refreshing a 5-month high. The crude oil market was driven by both Middle East geopolitical tensions and improved demand expectations, with WTI crude returning to near $77 per barrel, boosting energy stocks.

Institutional Interpretation: Rate Cut Cycle in Sight, But Beware of "Priced-In Expectations"

Mainstream Wall Street institutions generally welcomed the shift in Fed policy. Goldman Sachs Chief Economist Jan Hatzius expects in the latest report that the Fed will cut rates as early as September, possibly again in the fourth quarter, with two cumulative cuts for the full year, and a moderate easing path continuing into 2027. Morgan Stanley is more active, believing cooling inflation will support the Fed cutting rates by 25 basis points in both September and December, not ruling out the possibility of early action in November.

However, some institutions also warned of short-term risks. JPMorgan market strategist Marko Kolanovic warned that the market may have overly focused on rate cut expectations, and if inflation or non-farm data in August come in stronger than expected, it could trigger a sharp correction in rate expectations. He suggested investors control positions appropriately when stock indices are near historical highs and focus on high-quality bonds as a hedge.

Economic Data Supports: Soft Landing Narrative Strengthened

Before the resolution was announced, multiple economic data released early on July 31 provided support for the Fed's dovish stance. US ADP private sector employment increased by 152,000 in July, below the expected 168,000, cooling for the third consecutive month; JOLTS job openings fell to 7.92 million in June, the lowest since February 2021. Meanwhile, the Chicago PMI rose to 46.8 in July, still below the boom-bust line but better than the expected 44.5.

Analysts believe that the gradual cooling of the labor market is exactly what the Fed hopes to see, relieving inflationary pressure from wage increases without triggering mass unemployment. This supports the judgment that the US economy is achieving a "soft landing" and is the reason the market is willing to bet on risk assets.

Looking Ahead: Focus on Inflation and NFP, Awaiting "Last Mile" Confirmation

Looking ahead to the coming weeks, the market will closely watch the July CPI report and August non-farm payroll data to be released. If inflation continues its downward trend and employment remains resilient, a September rate cut is almost a sure thing; but if inflation unexpectedly rebounds, the Fed may turn hawkish again. CFRA Research Chief Investment Strategist Sam Stovall pointed out: "Before the rate cut lands, every market pullback may attract buyers. But after the index repeatedly hits new highs, technical indicators have entered overbought territory, and short-term volatility is inevitable."

For investors, the "barbell strategy" combining offense and defense may be favored again. On one hand, growth sectors benefiting from falling rates like tech and consumer discretionary still have room; on the other hand, reasonably valued healthcare and industrial leaders with stable cash flows are also worth allocating. The futures and options markets show that the CBOE Volatility Index (VIX), which measures market fear, has dropped to near 12.5, a historical low, reflecting that bullish sentiment is absolutely dominant.

Conclusion

The Fed's shift from "hawkish wait-and-see" to "dovish tilt" has injected new momentum into the US stock market for the second half of 2026. The S&P 500 breaking 6000 is not just a numerical milestone, but marks the deep evolution of market structure under the switching of interest rate cycles. However, history warns us that policy inflection points are often accompanied by high volatility. While enjoying the dividends, investors still need to fasten their seatbelts to cope with every uncertainty in economic data and policy paths.