Federal Reserve Chair Jerome Powell announces interest rates will remain unchanged.
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Investors anxiously awaited the Federal Reserve’s final policy meeting of 2024, causing US stock indexes to fall on Tuesday. The two-day meeting commenced on Tuesday, with a widespread expectation of a quarter-point interest rate cut being announced on Wednesday.
Market Anticipates Rate Cut, But Uncertainty Remains
The CME FedWatch Tool indicated a 95.4% probability of a 25 basis point rate cut on Wednesday. This probability dipped slightly from near certainty after the release of positive November retail sales data. Stronger than anticipated sales, fueled by vehicle purchases and robust consumer spending, suggested a healthy economic landscape.
Robust Retail Sales May Influence Fed’s Future Actions
Scott Helfstein, Global X head of investment strategy, highlighted the strength of the consumer, attributing it to a strong labor market and manageable household debt. November saw gains across various retail categories, from electronics and appliances to health and personal care. These robust sales figures could potentially lessen the urgency for the Fed to implement aggressive rate cuts in the near future.
A chart showing the probability of a Fed rate cut.
The surprising economic resilience and evolving inflation trends have introduced uncertainty into previously dovish projections for 2025 among some economists. Consequently, the likelihood of the Fed pausing rate cuts at its January meeting has risen to nearly 80%, up from approximately 70% a week prior.
Market Performance at Opening Bell
At the opening bell on Tuesday, major US indexes reflected the prevailing market apprehension:
- S&P 500: 6,052.60, down 0.35%
- Dow Jones Industrial Average: 43,472.92, down 0.56% (-244.56 points)
- Nasdaq composite: 20,109.68, down 0.33%
Other Market Developments
Beyond the Fed’s impending decision, several other notable developments impacted the financial landscape:
- Bank of America suggested the possibility of a Santa Claus rally in the stock market, contingent on the Fed meeting expectations.
- Certain states are exploring the establishment of strategic bitcoin reserves.
- Bank of America analysts projected a potential expansion of the chip stock rally beyond AI in 2025.
- Wall Street’s 2025 S&P 500 targets were compiled and analyzed.
- The chairman of Interactive Brokers warned of a potential bitcoin crash as a significant threat to the stock market in the coming year.
Commodities, Bonds, and Crypto Update
- West Texas Intermediate crude oil: $69.80 a barrel, down 1.26%
- Brent crude oil: $73.06 a barrel, down 1.15%
- Gold: $2,650.2 an ounce, down 0.76%
- 10-year Treasury yield: 4.403%, flat
- Bitcoin: $107,513, up 1.27%
Conclusion: Market Awaits Fed’s Decision
The US stock market experienced a decline on Tuesday as investors awaited the Federal Reserve’s interest rate decision. While a rate cut is widely anticipated, recent economic data has introduced uncertainty regarding the Fed’s future course of action. The market’s reaction to the Fed’s announcement will likely shape the trajectory of the stock market in the near term. Market participants will closely monitor the Fed’s statement for insights into its assessment of the economy and its policy outlook for the coming months.
