Fed's Last Chord of the Year: How Will Its Policy Affect Markets?

The Nasdaq hit a new record on Monday, while the S&P 500 also ended the day higher. Investors continue to analyze the latest economic data ahead of the Federal Reserve's final monetary policy statement scheduled for midweek, which could be key to understanding the future course of interest rates.

According to CME's FedWatch tool, the probability that the Fed will cut its key rate by 25 basis points at the end of its two-day meeting is 95.4%. Almost the entire market has already priced this scenario into its expectations.

"Last week was tough, and markets may have been slightly oversold. Now, with a rate cut on Wednesday almost certain, the main question is what kind of commentary and rhetoric the Fed will deliver," said Sam Stovall, chief investment strategist at CFRA Research.

The expert predicts that the upcoming rate cut will be accompanied by a tough stance from the Fed. "The regulator will likely keep investors on edge, emphasizing that further steps depend on the data. As a result, the volume of rate cuts next year may be smaller than the market is expecting," he added.

On the economic front, S&P Global recorded a decline in the PMI index to 48.3 in December. This is below both the November level (49.7) and analysts' forecasts (49.8). Such indicators indicate a slowdown in activity in the manufacturing sector.

In addition, industrial production showed the lowest level since May 2020, which is associated with expectations of tariff increases. The latter may lead to an increase in the cost of imported materials as early as next year, which will add pressure to production chains.

Markets froze in anticipation of the outcome of the Fed meeting. Key indices have already reflected confidence in rate cuts, but the further trajectory will remain largely dependent on macroeconomic statistics and the regulator's strategy.

On Monday, the stock market again showed mixed results. The Dow Jones Industrial Average lost 110.58 points (0.25%), ending the day at 43,717.48. At the same time, the S&P 500 added 22.99 points (0.38%) and reached 6,074.08. The leader was the Nasdaq Composite, which rose by 247.17 points (1.24%) and closed at 20,173.89.

Last week was a turning point for the S&P 500, which interrupted a three-week growth, and the Dow showed a decline. However, Nasdaq continues to please investors: the index has demonstrated positive dynamics for the fourth week in a row. At the same time, the Dow Jones was under pressure for the eighth session in a row - this is the longest series of declines since the summer of 2018.

On Monday, shares of the largest technology companies known for their high capitalization showed strong growth. For example, shares of Alphabet, the parent company of Google, jumped by 3.6%. Tesla was even more impressive, rising 6.1%. The gains were a key driver for the communications services and consumer discretionary sectors, which led the gains among the 11 major S&P 500 indexes.

Wedbush Securities raised its price target on Tesla to a Wall Street record of $515, reflecting high expectations for the company, which continues to impress with its innovation and solid performance.

As investors await the outcome of the Fed meeting, the focus of attention will be on retail sales data due out on Tuesday. These figures will provide an indication of how robust consumer demand remains, which is important for assessing the future economic growth.

Amid mixed signals from the market, investors are focusing on the Fed decision. Any clue about the regulator's future actions could be a decisive factor for the sentiment on the stock exchange.

The S&P 500 has gained more than 27% in a year, driven by several key factors. These include the booming AI industry, expectations of a Federal Reserve rate-cutting cycle, robust economic performance, and anticipation of pro-business policies from the new Trump administration.

The index has gained an impressive 58.2% over the past two years, making it one of the most successful periods in history. By comparison, the last time the S&P 500 achieved a similar result was in 1997–1998, when it gained 65.9%.

Honeywell International shares jumped 3.7% after the company said it would overhaul its aerospace business. The move could result in the division being split, opening up new opportunities for investors.

On the New York Stock Exchange, decliners outnumbered advancers by a 1.27-to-1 ratio. However, on the Nasdaq, the situation was more balanced: advancers outnumbered decliners by a narrow margin of 1.05-to-1.

The S&P 500 posted 14 new 52-week highs and 18 new lows. The Nasdaq Composite showed more noticeable volatility, with 112 new highs and 193 new lows.

Trading volume on U.S. exchanges reached 15.33 billion shares, which is higher than the average of 14.04 billion over the past 20 days. This surge in activity indicates increased investor interest in the current market situation.

The S&P 500's rally and impressive two-year performance show continued interest in the stock market. Investors are looking to technology developments, the Fed's monetary policy, and external stimulus for the economy.

Cryptocurrency Is Back on the Rise: Bitcoin Has Reached a New High Following Donald Trump's Statement. The US President-elect hinted at plans to create a Bitcoin Strategic Reserve. This was a strong signal for investors and spurred interest in digital assets.

Tech giants continue to impress. The FANG (.NYFANG) index, which includes the sector's largest companies, rose 2.7% on the day, becoming one of the market leaders. Stocks of leading tech players remain in the spotlight due to their resilience and innovation.

Fed: Last meeting of the year intrigue

The Federal Open Market Committee (FOMC) begins its final meeting of 2024 on Tuesday. The regulator is expected to cut the key rate by 25 basis points. However, the further course of monetary policy remains in question, especially against the backdrop of conflicting economic data.

Investors are focusing on the Fed's Economic Forecast Summary and the so-called "dot plot" that will show a possible scenario for rate cuts in the future. The US economy is showing stability, but slowing inflation creates additional uncertainty.

According to S&P Global, business activity in the US unexpectedly accelerated in December, despite weakness in the manufacturing sector. These indicators strengthen confidence in the resilience of the economy, despite global challenges.

In addition to the Fed, the actions of other central banks are also on everyone's lips. Sweden's Riksbank is likely to cut interest rates. Meanwhile, policymakers in Japan, the UK and Norway are all expected to leave their rates unchanged, highlighting their differing approaches to global economic challenges.

Bitcoin's rally and tech activity set a positive tone, but the outcome of the Fed meeting will be key to shaping markets in the coming weeks. Investors are bracing for more challenges as they watch data and policymakers.

Weak retail sales data from China has sent a wake-up call to the global economy, highlighting the need for more decisive action from Beijing. Experts and investors are looking to the Chinese government for more stimulus to support domestic demand and restore momentum in the world's second-largest economy.

European stock markets ended the day lower, led by a drop in luxury and energy stocks. These sectors came under pressure after disappointing data from China, an important market for European manufacturers.

An additional negative factor was the unexpected downgrade of France's rating by Moody's last Friday. The decision increased investor concerns, causing a decline in French indices and affecting the pan-European market.

The MSCI Worldwide Equity Index (.MIWD00000PUS) added 1.62 points, or 0.19%, to 867.76. Meanwhile, the pan-European STOXX 600 (.STOXX) slipped 0.12%, while the FTSEurofirst 300 (.FTEU3) fell 1.38 points, or 0.07%.

The MSCI Emerging Market Equity Index (.MSCIEF) lost 4.42 points, or 0.40%, to 1,102.59. Weaker demand in global markets and unfavorable cues from China played a role, triggering a wave of declines in emerging markets.

The MSCI Asia-Pacific Index outside Japan (.MIAPJ0000PUS) closed down 0.38% at 583.19. Japan's Nikkei (.N225) also fell slightly, down 12.95 points or 0.03%, to end the day at 39,457.49. These figures reflect the fragility of Asian markets, where China's influence remains a dominant factor.

The slowdown in China and tensions in European markets point to the need for strong action by governments and central banks. Beijing must focus on stimulating domestic demand, while European countries must strengthen their economies amid growing uncertainty.

Global markets are on hold, with investors watching the actions of central banks and the Chinese government. The next steps in these regions will determine the future dynamics of the global economy.

The American currency maintains positions near three-week highs as the market awaits signals from the Federal Reserve. Investors hope to hear forecasts on monetary policy for next year, which may indicate a slowdown in the pace of rate cuts.

The dollar index, which measures its strength against major world currencies, fell slightly - by 0.01% to 106.86. The euro in response added 0.07%, reaching $1.0509. At the same time, the dollar rate against the Japanese yen rose by 0.31%, amounting to 154.13.

After Donald Trump's victory in the presidential election, Bitcoin continues its upward trend, soaring by more than 50%. Amid Trump's statements about the possible creation of a national cryptocurrency reserve, Bitcoin has updated its historical maximum, exceeding $106,000.

At the close of trading, the cryptocurrency has grown by 3.10%, reaching $106,015. Ethereum, another popular digital currency, has also shown a noticeable growth - by 4.94%, reaching $4,046.40.

Amid global economic uncertainty, oil prices are showing weakness. American crude oil has fallen by 0.81%, ending the day at $70.71 per barrel. Brent has lost 0.78%, reaching $73.81 per barrel.

Investors have turned to gold as a safe haven asset amid a weakening dollar. Spot gold rose 0.17% to $2,652.29 per ounce. However, U.S. gold futures fell 0.15% to $2,652.00 per ounce.

Global markets, including currencies, cryptocurrencies, and commodities, are awaiting the Fed's decision. The impact of the regulator's upcoming statements on the trajectory of dollar assets, gold, and oil, as well as the outlook for cryptocurrencies, will remain in the spotlight for investors in the coming days.