The S&P 500 sits at just over 6,870 this morning, a few points below its all-time high of 6,890.89 and futures are flat ahead of the opening bell in New York. Traders are holding their breath until Wednesday, when the U.S. Federal Reserve’s Federal Open Markets Committee holds its December meeting, at which Chairman Jerome Powell is widely expected to announce a 0.25% interest rate cut. The CME FedWatch Futures Index shows an 87.4% chance the Fed will make this cut.
Until then, don’t expect much from the markets. Asian markets were mostly higher this morning and Europe was flat. The VIX “fear” index (which measures volatility) is down 10.33% over the last five sessions.
“This week, all roads lead to Wednesday’s FOMC,” Jim Reid and his colleagues at Deutsche Bank told clients this morning. If the Fed cuts rates to the 3.5% level, that would represent six cuts since September 2024, they said.
The market will move again once it digests Powell’s statement and his remarks to the press. Recently, Fed members have suggested that they are more concerned about the weak labor market than rising inflation – which is why the rate cut appears to be stalled. Any change in tone could send Wall Street into risk-aversion mode.
“The decision is unlikely to be unanimous, with dissent expected from both hawkish and dovish members. If four or more officials break ranks, it would mark the greatest division since 1992,” Reid and others said. “Beyond the headline, the tone of Chairman Powell’s press conference and accompanying statement will be critical. We expect Powell to emphasize that the barrier to further cuts in early 2026 is high, signaling a near-term pause. This guidance will be key to maintaining credibility ahead of likely weaker labor market data expected later in December.”
The other measure that could help persuade the Fed to produce a new wave of cheaper money is falling consumer confidence. “Consumers remain depressed in their assessment of the economy. Concerns about rising prices and the health of labor markets continue to dominate the consumer psyche,” Grace Zwemmer of Oxford Economics said in a research note.
“Households still feel cramped, despite improving expectations,” Nancy Lazar and Diana Hagedorn of Piper Sandler told clients.
Samuel Tombs and Oliver Allen of Pantheon MacroEconomics agree: “The U.S. consumer appears less resilient after last week’s income and spending report. … We believe the September data portends a very weak fourth quarter.”
Here’s a look at the markets before the open in New York this morning:
- S&P 500 Futures Contracts were flat this morning. The last session closed up 0.19%.
- STOXX Europe 600 were stable at the start of the session.
- United Kingdom FTSE100 was stable at the start of the session.
- from Japan Nikkei 225 was up 0.18%.
- China CSI300 was up 0.81%.
- South Korea KOSPI was up 1.34%.
- India NIFTY50 is down 0.86%.
- Bitcoin was at $92,000.
