By Catherine Brock,Contributor

Copyright forbes

Fed Chair Jerome Powell expressed caution about lower rates Wednesday, after two fellow Fed governors took a rate-cutting stance earlier in the week.

Stock prices fell Thursday after the interest rate outlook turned cloudy. Fed Chair Jerome Powell expressed caution about lower rates Wednesday, after two fellow Fed governors took a rate-cutting stance earlier in the week.

The large-cap S&P 500 index fell 0.3% and the technology-focused Nasdaq Composite also dipped 0.3%. The Dow Jones Industrial Average, focused on blue-chip stocks, retreated by 0.4%.

The future of interest rates has been a focus for investors in recent weeks. The Fed manages the federal funds rate, which influences what consumers and businesses pay for loans. The federal funds rate has been relatively high in recent years—from 3.13% to 5.38% between September 2022 and September 2024—as the Fed struggled to control runaway inflation.

Many experts interpreted the the recent quarter-point rate reduction as the beginning of a gradual move to lower interest rates. But Powell’s conservative stance has cast doubt on that interpretation.

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Lower interest rates lessen borrowing costs for businesses, which supports higher profits and more aggressive growth plans.

Stock futures for the S&P 500, Nasdaq 100 and Dow Jones are slightly down ahead of the market open on Thursday.

Investing & Economic News To Watch Today

Economic releases to watch on Thursday, September 25 include:

Initial jobless claims for the week of September 20. Weekly jobless claims are expected to be 235,000, up from 231,000 in the prior week.

Existing home sales. The National Association of Realtors releases home sales data monthly. Analysts expect home sales to be 3.96 million in August, down from 4.01 million in July.

Corporate earnings on tap include:

Costco (COST). The club store is expected to report EPS of $5.81 for the August quarter. EPS in the prior-year quarter was $5.29.

Accenture plc (CAN). The consensus EPS estimate for IT services company Accenture is $2.98 for the August quarter. In the prior-year quarter, CAN reported EPS of $2.66.

CarMax (KMX). Analysts expect used car retailer CarMax to report EPS of $1.03 for the August quarter, which would be up from $0.85 in last year’s August quarter.

Today’s Trading Lesson

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Active vs. passive: Which is right for you? Active and passive investors use different approaches and have different goals. Understanding which approach suits you best can keep you focused and contribute to better investing results.

Here’s the key differentiator between active and passive investing: Active investors devote money or time for a chance to outperform the market, while passive investors accept market-level performance to prioritize cost- or time-efficiency. Active investing is the riskier choice, because there’s no guarantee of outperformance.
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Active Investing

Two main ways to practice active investing are:

Hand-picking stocks. You hand-pick your investments and decide when to trade for maximum results. You can adjust your selection parameters and buy/sell triggers to suit current market conditions. This approach is time- and research-intensive. To capitalize on opportunities, you may need to trade quickly as news arises. You are also likely to trade often, which can raise your expenses.

Buying actively managed funds. Actively managed funds have a management team that picks stocks and makes trading decisions. These funds charge relatively high expense ratios because they are more labor-intensive to manage.

Passive Investing

The common approach to passive investing is buying index funds. Index funds mimic the performance of indexes like the S&P 500 and the Wilshire 3000.

Index funds have low expenses because their portfolios are formulaic and automated. The fund’s holdings either copy the reference index exactly or they use a representative sample. Either way, there’s no team of researchers or analysts deciding what to trade and when—the index dictates those decisions, which keeps administrative costs low.

Index funds are cost-efficient and easy to own. Broad-market index funds are suitable for indefinite holding periods. They do not require careful oversight, assuming you accept that they’ll rise and fall with their reference index. Their primary disadvantage is that they won’t beat the market.
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