North American Market Pulse — September 18, 2025

Headline

Markets Surge After Rate Cuts, But Small Caps Remain Cautious – Tech & Big Caps Lead, Can Small Players Catch Up?

1) Macro & Policy Landscape

Today’s markets were driven by central bank action and investor hopes for more policy easing. The Federal Reserve and Bank of Canada both delivered 25 basis point rate cuts, with the BoC dropping its key rate to a three-year low of 2.5%. These moves follow signals from both banks that more cuts are likely later in the year. Reuters+1

Inflation continues its gradual descent. Input and producer price metrics are easing, though core inflation in many sectors remains sticky. Meanwhile, labor market indicators are softening, which gives cushion to the argument that monetary easing is appropriate. Investopedia+2Reuters+2

In Canada, sentiment got a boost as TSX futures rose slightly—about 0.3%—after the BoC cut rates and hinted that further easing may be coming. Consumer discretionary stocks led gains on the TSX today. Reuters

2) Big Caps & Tech Dominate the Rally

With rate cuts now a reality, large-capitalization growth and technology names led the charge:

Semiconductors saw a sudden roar: Intel exploded, up nearly 25%, after Nvidia announced a $5 billion co-investment to partner in AI/data center chip production. This sent ripple effects through other chipmakers like Applied Materials, Lam Research, and Micron. Reuters+2Investors+2

The Nasdaq and S&P 500 both hit intraday record highs, driven by strength in Big Tech and AI-adjacent names. Investors braced for further easing and a supportive rate environment. Reuters+1

Other sectors tied closely to interest rates (financials, real estate, consumer discretionary) are also trading well, now that borrowing costs look likely to ease. But many of these gains depend on expectations of stronger earnings and margin improvements. Vanguard+1

3) Small Caps: Subdued, But Not Ignored

While many small-cap indices rose today (Russell 2000, S&P SmallCap 600) in reaction to rate cuts and risk-on sentiment, they did not surge in the same way as large caps. The difference in momentum underscores lingering skepticism. Reuters+3Investors+3Investing.com+3

Here are the mixed signals:

Positives:

With lower rates, small companies with floating debt or near-term refinancing obligations will benefit disproportionately—less interest burden and more breathing space. Vanguard+1

A few small-cap names are getting renewed institutional attention, especially those with good balance sheets, domestic end markets, and less exposure to international supply chain strains. Yahoo Finance+1

Challenges:

The race to rally is tempered by weak earnings visibility in many small-caps. Investors are still sorting out which names can actually leverage the rate cuts into profit growth.

Liquidity remains thin. Even positive moves can reverse sharply in small-caps if sentiment shifts or if a macro surprise hits.

While the policy environment is now looser, inflation is still sticky in certain sectors (housing, services), which could force central banks to be more cautious. Market watchers noted that Powell emphasized a “meeting by meeting” approach. Investing.com

4) Key Stories of the Day

Some notable developments that grabbed attention today:

Intel-Nvidia Partnership: Nvidia’s investment in Intel gave Intel a huge lift and renewed interest in chip supply chains and AI hardware. This kind of cooperation between big players has big ripple effects, especially for smaller suppliers. Reuters+2NonStop Local Tri-Cities/Yakima+2

Rate Cuts Confirmed: The Fed’s cut and the BoC’s matching move mark a coordinated easing environment for North American markets. While the cuts are expected, the pace and timing of future cuts still hang in the air—investors are watching every word from central bank officials. Reuters+2Reuters+2

Small-Cap Reporter: L.B. Foster (FSTR) made waves at a small-cap conference today. The company discussed its transformation strategy, focusing on higher-margin business lines in infrastructure and rail tech, improving margins, and disciplined capital deployment. For those looking into small caps, these are the kinds of behaviors that withstand market cycles. Investing.com

5) Technical & Sentiment Indicators

Several small-cap indices are approaching resistance levels that have held earlier this month. Breaking through with volume would be a strong signal, but past efforts have failed to sustain momentum. Investors+1

Market breadth is improving: more stocks are participating in gains today than in recent sessions. That’s a positive sign. But attention remains heavily skewed toward tech, semis, and growth.

Options markets show rising implied volatility and skew in small-caps – indicating that many investor hedges are active, suggesting fear of downside remains a real concern.

6) What to Watch Next

Here are the events, data, and signals that could shape the market in the near term:

1. Next Fed speakings & minutes — especially any clues on pace and magnitude of upcoming cuts, and how inflation and labor data are being factored.
2. Upcoming inflation reports (CPI, core CPI, PPI)—they’ll test whether central banks are confident enough to continue cuts.
3. Small-Cap Earnings Results—names that deliver solid margin news or beat estimates may lead the next leg up.
4. Bond Yields Behavior—especially the 10- and 30-year yields. If they rise sharply, growth and small-caps may get hit.
5. Liquidity / Fund Flows—watch how money is moving into small-cap ETFs or funds, which often precedes broader adoption.
6. International / Geopolitical Risks—trade policy, supply chain disruptions, or foreign regulation could pose unexpected headwinds.

7) Bottom Line

Today was a confident day for North American markets. Rate cuts are now underway, and that has lifted large caps and tech stocks in a meaningful way. Small caps are getting some benefit, but they’re not yet leading.

For retail investors, this is a moment of opportunity—but also of caution. The environment is favorable, but only those small-cap companies with sound fundamentals, strong margins, low leverage, and a clear growth path are likely to make the most of this easing cycle. Speculative exposure should remain limited. Those who are selective now may benefit when momentum broadens.

By SCN Editorial Team

Tags

1. #RateCut
2. #SmallCapStocks
3. #MarketRally
4. #TechLeading
5. #FedPolicy
6. #InvestingOutlook
7. #NorthAmericaMarkets