Stock market shows negative reaction to surprise Fed rate hikes, positive to cuts

Academic research confirms equity markets drop sharply on surprise Fed rate hikes—one study found a 4.68% one-day decline per percentage point surprise cut (inverse relationship). Expected hikes are priced in; surprises drive volatility. Traders should fade rallies into hawkish FOMC surprises and buy dips on dovish surprises, especially in tech-heavy indices (NQ) sensitive to discount rates.