The stock market finally has what it wants — and is now asking 'now what?'

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The breadth of strength is unmistakable for anyone watching their portfolios and financial headlines.

At long last, rate cut relief has arrived. And while Wall Street had priced in the Fed’s shift toward easing, the actual decision brought a jolt of bullish energy.

All three major averages clinched record closes this week. And for the first time since 2021, the Russell 2000 (^RUT) notched a new closing high. Investors poured into small-cap stocks that are poised for a boost with lower interest rates on the horizon.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

Tech stocks are also continuing their strong climb and have completely brushed off Chinese AI developer DeepSeek’s revelation that training its R1 model came at only a fraction of the cost of its US rivals. Certainly a marked departure from the last time DeepSeek dropped big news.

With more paths to revenue and a renewed commitment to invest in AI, any shock value of DeepSeek as a competitor to the tech giants has faded. And Intel’s government backing and partnership with Nvidia also added to investor optimism.

Rallying markets appear to be shaking off the initial hesitation after the rate decision.

Yes, more cuts are coming, the forecasts of central bankers showed, but there was a wide dispersion of predictions for when those cuts would show up and how many would be appropriate. New Federal Reserve governor Stephen Miran on Friday revealed that he was the outlier on the “dot plot,” penciling in a total of six cuts this year. But Fed officials, by and large, were less aligned than in previous forecasts.

In some ways, the meeting whose outcome was largely predicted also confused investors with mixed messages. As often happens when we get what we want, we ask what’s next — and a satisfactory answer isn’t immediately obvious.

The Fed, for instance, upgraded its growth outlook but flagged a weakening labor market with downside risks, suggesting that the priority for policymakers is to protect jobs, even as inflation persists above target levels. Two more cuts are likely this year, according to the Fed’s “dot plot.”

But even as Fed Chair Jerome Powell signaled confidence in eventually taming inflation, he said that “there are no risk-free paths now,” a line we brought attention to Thursday. Central bankers now have to execute a balancing act — grappling with labor weakness and sticky pricing pressures — with unclear outcomes. Nonetheless, Wall Street is extending its record run.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.

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