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The oldest of the three main U.S. equity indexes opened higher and held its ground all the way through a widely expected rate-cut announcement, Fed Chair Jerome Powell’s press conference and the closing bell on Wednesday. The S&P 500 and the Nasdaq Composite were up and down throughout Fed Day but also surged on what many market participants may see as a “Goldilocks” scenario unfolding for the economy.
After a third-quarter-point reduction since September, the target range for the federal funds rate is now 3.50% to 3.75%. According to Louis Navellier of Navellier & Associates, the latest move by the Federal Open Market Committee (FOMC) “will determine how the year will close out.”
Navellier notes “that when Powell is replaced next May with a Trump nominee, further cuts will be forthcoming.” He adds that “100% of the time stocks were higher 12 months later” when the FOMC cuts the fed funds rate – good news for a stock market that’s less than 2% from new all-time highs. “On top of solid growth forecasts for the U.S. GDP and earnings,” Navellier concludes, “a cut today is plainly bullish for stocks.”
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The Fed’s updated Summary of Economic Projections (pdf) – including its dot plot – reflects both concerns about the jobs market and persistent inflation as well as rosier growth expectations. The median forecast shows 2.3% GDP growth in 2026, up from 1.8% in September, core inflation of 2.5%, down from 2.6%, and unemployment steady at 4.4%. Altogether, it adds up to only one rate cut in 2026.
Fed funds futures pricing shows a 75.6% probability the Fed holds its benchmark at 3.50% to 3.75% when it meets in January. We’ll continue to track reaction to the December Fed meeting in our live Fed blog.
By the closing bell, the blue-chip Dow Jones Industrial Average was higher by 1.1% at 48,057, the broader S&P 500 was up 0.7% at 6,886, and the tech-heavy Nasdaq Composite added 0.3% to 23,654.
GEV doubles its dividend
GE Vernova (GEV, 15.6%) doesn’t make the list of our favorite dividend-paying stocks yet, but doubling its quarterly payout rate is a good way to get there. GEV, which was spun off from General Electric in April 2024, has generated a total return of more than 377%, including 90%-plus so far in 2025.
GEV declared a dividend of 50 cents per share for the first quarter of 2026, up from 25 cents and payable on February 2 to shareholders of record on January 5. GE Vernova’s board of directors also approved an increase in the company’s stock buyback authorization to $10 billion from $6 billion.
Susquehanna analysts Charles Minervino and Eric Clay reiterated their Positive (or Buy) rating and raised their 12-month target price for GEV from $750 to $775 after management also reset its long-term revenue and margin forecasts in a December 9 investor update.
GE Vernova said it would see $52 billion in revenue by 2028; its previous forecast was for $45 billion by then. Management also said EBITDA (earnings before interest, taxes, depreciation and amortization) margin would be 20%, better than its prior forecast of 14%, “as higher pricing flows through the backlog, capacity is scaled, and it continues to execute on its lean strategy.”
Minervino and Clay “remain bullish on GEV given its position as the leading gas turbine supplier globally in an environment where load growth expectations continue to accelerate.”
Indeed, power demand driven by the AI boom means GE Vernova can “extend its backlog out to 2030” and beyond. “The company’s new long-term financial targets give us growing confidence in the trajectory of the business,” the analysts conclude.
It’s go time for most stocks and sectors
Nike (NKE, +3.9%), Caterpillar (CAT, +3.6%), Johnson & Johnson (JNJ, +3.3%) and American Express (AXP, +3.2%) were among 23 of 30 Dow Jones stocks to close higher on Wednesday, and JPMorgan Chase (JPM, +3.2%) rebounded from a steep sell-off on Tuesday.
Nvidia (NVDA, -0.6%) rallied off its intraday lows, but along with Microsoft (MSFT, -2.8%) the leader of the AI revolution was at the bottom of the index. Nine of 11 stock market sectors were up for the day, including tech stocks, while consumer staples were flat and utilities were down as a risk-on mood took hold in the afternoon.
“With the economy performing better than expected amid a complex macroeconomic environment and corporate earnings rising to double-digit growth,” LPL Financial Chief Technical Strategist Adam Turnquist writes, “strategists have increased their stock market forecasts for 2026.”
The average year-end 2026 price target for the S&P 500 is up from around 6,500 in early September to 7,269 as of December 9. “A bottom-up analysis,” he elaborates, “which aggregates analyst price targets for individual S&P 500 components, suggests the index could reach 7,900 by the end of next year.”
Turnquist says communication services stocks, real estate and materials stocks have the greatest potential upside, while consumer staples stocks, health care and industrial stocks have the weakest – and industrials are pegged for 12.8% upside.
Based on data collected by FactSet, 2026 earnings per share (EPS) for the S&P 500 is forecast to be $309, year-over-year growth of 13.6% vs full-year estimates for 2025. LPL Research sees the index at 7,300 to 7,400 by the end of next year.
“Key catalysts include the historical precedent of bull market cycles continuing absent a recession, earnings power fueled by accelerating AI spending trends, easing monetary policy, and a stimulus boost from the One Big Beautiful Bill Act,” Turnquist concludes.