The Fed giveth and the Fed taketh away.
That's the lesson for investors following the week-to-week action in the S&P 500 (Index: SPX), which fell by over 0.6% to close out the trading week ending on Friday, 13 December 2024 at 6,051.09.
That retreat came after the preceding week's near one-percent gain, which came as expectations there would be three rate cuts in 2025 took hold. But just one week later, the CME Group's FedWatch Tool projects only two rate cuts in 2025, quarter point reductions that will be announced on 19 March (2025-Q1) and 18 September (2025-Q3). A third rate cut in 2025-Q2 now seems to no longer be in the forecast.
Meanwhile, the CME Group's is giving 96% probability the Fed reduce the Federal Funds Rate by 0.25% later this week, on Wednesday, 18 December 2024. Investors will be paying close attention to statements being made by Fed officials, particularly if they give any suggestion as to the prospects of a rate cut in 2025-Q2.
This future quarter matters because investors are closely focusing their forward-looking attention on it as they set current day stock prices. The latest update of the alternative futures chart shows where things currently stand:
What happens next depends on the random onset of new information, although in this upcoming week, the new information with the most potential to reshape the future expectations of investors is scheduled. Until then, here are the past week's market moving headlines:
- Monday, 9 December 2024
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- Signs and portents for the U.S. economy:
- Fed minions December 2024 rate cut "baked in":
- Bigger stimulus, trouble developing in China:
- China vows to ramp up policy stimulus to spur growth in 2025
- China's inflation weakens as new risks cloud horizon
- Bigger trouble developing in Japan, BOJ minions get data pushing them to increase interest rates:
- Japan's bankruptcies set to hit 11-year high in 2024, data shows
- Japan revises Q3 GDP higher, keeps alive BOJ rate-hike expectations
- Eurozone a developing mess:
- Dow ends lower, S&P 500, Nasdaq pull back from record highs as Nvidia loses ground
- Tuesday, 10 December 2024
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- Signs and portents for the U.S. economy:
- Oil prices rise on China stimulus, possible tight supply in Europe
- US importers set to accelerate shipments to record levels on tariff, strike threats
- Brokerages "bake in" December 2024 rate cut by Fed minions:
- Brokerages still expect 25-bps US rate cut in December
- Federal Reserve to cut rates by 25 bps on Dec. 18, pause in January: Reuters poll
- Bigger trouble, stimulus developing in China:
- China's exports slow sharply, imports shrink ahead of Trump tariffs
- China has full confidence in achieving this year's growth target, says Xi
- ECB minions not liking their latest Eurozone problem child:
- S&P, Dow, Nasdaq end listless session lower with CPI inflation on deck; Oracle slides
- Wednesday, 11 December 2024
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- Signs and portents for the U.S. economy:
- US inflation rose to 2.7% in November
- US consumer prices post largest rise in seven months; rents finally slowing
- VIEW In-line Nov US CPI rise leaves door open for Dec ease
- Oil up on demand hopes from China's 'looser' monetary policy
- Big bank CEOs unusually positive:
- BofA CEO says business outlook is brighter under Trump, expects surge in banking, trading revenue
- BNY CEO optimistic on US economic growth, AI potential
- Bigger trouble, stimulus developing in China:
- China ready to go deeper into debt to counter Trump's tariffs
- Exclusive: Chinese authorities are considering a weaker yuan as Trump trade risks loom
- BOJ minions credibility coming on the line, again:
- Japan's wholesale inflation accelerates, keeps BOJ rate-hike plan in focus
- Japan manufacturers' mood turns negative for the first time in 10 months - Reuters poll
- Other central banks taking different tacks on interest rates:
- Bank of England set to stay in central bank slow lane and keep rates on hold
- Bank of Canada likely to reduce interest rate by 50bps
- Brazil's central bank hikes more than expected, signals more tightening ahead
- Driving ability of ECB minions questioned:
- Tame US inflation boosts S&P 500, Nasdaq rallies above 20,000
- Thursday, 12 December 2024
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- Signs and portents for the U.S. economy:
- U.S. Producer Prices Rise 0.4% in November, Well Above Expectations
- US 30-year fixed-rate mortgage falls to 6.60%
- Oil little changed as IEA surplus forecast offsets rate cut optimism
- Bigger trouble, stimulus developing in China:
- BOJ minions to boldly ignore inflation and keep lower rates going longer:
- Japan Nov inflation likely accelerated, exports up on weak yen: Reuters Poll
- Exclusive: BOJ leaning toward keeping rates steady next week, sources say
- BOJ to skip rate hike in December, majority of economists say
- Other central banks acting to cut rates:
- ECB minions deliver expected Eurozone rate cut:
- ECB cuts rates again and keeps door open to further cuts
- ECB cuts interest rates for fourth time this year
- Lagarde comments at ECB press conference
- Handful of ECB policymakers wanted larger cut, worried about tariffs - sources
- Dow, S&P end lower, Nasdaq drops from peak as Adobe tumbles, PPI inflation comes in hot
- Wall Street closes lower as investors assess data after recent gains
- Friday, 13 December 2024
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- Signs and portents for the U.S. economy:
- Fed minions still expected to deliver quarter point rate cut next week:
- Bigger stimulus not measuring up in China:
- BOJ minions get new reason to not rate hike Japan's intereest rates:
- ECB minions say they'll think about more rate cuts as bigger trouble develops in the Eurozone:
- ECB governors back more rate cuts if inflation settles at goal
- German exports fall more than expected in October
- Euro zone industry did not fall in Oct but recovery not in sight
- Wall Street averages close mixed while Broadcom ends week by surging to $1T market cap
The Atlanta Fed's GDPNow tool’s estimate of the real GDP growth rate for the current quarter of 2024-Q4 had no updates in the past week and was unchanged at +3.3%.
On an upcoming programming note, the last edition of the S&P 500 chaos series this year will be on Monday, 23 December 2024.
Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bear who is taking a present away from a Wall Street bull". The image we got wasn't what we prompted, but we decided we could work with it....