- US stocks traded mixed on Wednesday as traders anticipated the Fed’s next policy move.
- Markets are pricing in a near-100% chance the Fed will trim rates another quarter-point this afternoon.
- Bets, though, are scaling that central bankers will pause their rate-cutting cycle in January.
US stocks were mixed on Wednesday as traders focused their attention on the Federal Reserve’s last interest rate decision for the year.
The Dow Jones Industrial Average traded higher, looking to snap its nine-day losing streak. The 10-year Treasury yield was about flat at 3.95%.
Investors are waiting for the conclusion of the central bank’s December policy meeting, which is widely expected to result in a 25 basis point rate cut.
The meeting also coincides with the Fed’s quarterly Summary of Economic Projections, and will be followed by Jerome Powell’s presser after the policy meeting. Both should give investors more guidance as to where interest rates will land the following year.
John Velis, an FX and Macro Strategist at BNY, expected the Fed to cut rates a quarter-point Wednesday, but also map out another 100 basis points of cuts next year.
“Disinflation has slowed, which by itself would likely make the FOMC more cautious in 2025,” Velis said in a note on Tuesday.
“The prevailing view is that the Fed will accompany the rate cut with hawkish comments, indicating that it’s time to take a pause in loosening monetary policy,” David Morrison, a senior market analyst at Trade Nation, added on Wednesday. “This seems wise, given the incoming Trump administration, the recent uptick in inflation, decent US economic growth and the strength of the US stock market.”
Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Wednesday:
- S&P 500: 6,044.72, down 0.10%
- Dow Jones Industrial Average: 43,538.69, up 0.20% (+88.79 points)
- Nasdaq composite: 20,041.84, down 0.32%
Investors, in the meantime, are dialing up bets that the Fed will need to pause its rate-cutting cycle early next year. Markets have priced in an 80% chance rates will be just 25 basis-points lower in January, which implies a pause coming this month or the following month.
“The Fed has reached the last mile of its journey to 2% inflation, from the 9% peak in mid-2022, but these final yards are proving challenging,” Richard Flynn, the managing director of Charles Schwab’s UK arm, wrote on Wednesday. “Looking ahead, we do anticipate a pause in interest rates in early 2025, with inflation proving sticky.”
After this week’s rate decision, central bankers will take in another inflation and jobs report before convening for their January policy meeting.
“Certainly, questions and thoughts on any potential wildcards surrounding US monetary policy are front of mind,” BNY’s Velis added.
Here’s what else is going on:
- Investors’ dwindling cash holdings may be a sign it’s time to sell stocks, according to Bank of America.
- Tesla cinched a fresh record-high after Wall Street issued new bullish price targets for the carmaker.
- Here’s the stock market playbook for 2025, according to Morgan Stanley’s top stock strategist.
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil ticked higher 0.84% to $70.67 a barrel. Brent crude, the international benchmark, was higher by 0.59% to $73.62 a barrel.
- Gold decreased 0.14% to $2,642.37 an ounce.
- The 10-year Treasury yield rose 1 basis point to 4.401%.
- Bitcoin dropped 2.49% to $104,793.
