As the new trading week kicks off, stock futures are showing mixed signals. Investors are carefully weighing the potential trajectory of interest rates next year following hints from the Federal Reserve that rates could remain elevated for an extended period. Futures linked to the S&P 500 are hovering near the unchanged mark, whereas those associated with the tech-heavy Nasdaq have seen a 0.3% increase. Meanwhile, Dow Jones Industrial Average futures have slipped by 0.3%.
Last Friday offered some positive momentum on Wall Street, but it contrasted with the overall tumultuous and downward trend throughout the week. All three major averages climbed over 1% by the week’s end, yet they were still down approximately 2% overall. The Fed’s recent signals suggest a cautious approach to rate cuts next year, a stance that did not sit well with the markets, triggering what became one of the year’s most challenging trading days on Wednesday.
However, some relief came with Friday’s release of the Fed’s favored inflation measure, the Personal Consumption Expenditures index. The report indicated signs of easing inflation, though certain elements remain stubbornly persistent. Notably, the lone dissenter in the Fed’s recent decision to cut rates cited the need to continue addressing inflation concerns as the reason for her opposition.
Presently, insights from the CME FedWatch tool highlight that many investors believe the Federal Reserve will maintain steady rates in the upcoming month. Looking forward to their March meeting, there seems to be a roughly even split in the market’s expectations between a rate cut and a status quo approach.
As this week unfolds, with a light schedule, Wall Street has the opportunity to pause, absorb recent developments, and strategize ahead of what lies in 2025. Trading will wrap up early at 1 p.m. ET on Tuesday, ushering in the Christmas holiday break on Wednesday.
