Sign InFed Rate Cut Nears: What to Know Ahead of This Trading Week
Alex Vellor
The week ahead is packed with market-moving events. The Federal Reserve's meeting could set the tone for 2025, especially if it signals a slower pace of rate cuts.
Stock investors will keep a close eye on MicroStrategy’s (NASDAQ:MSTR) debut in the Nasdaq 100 and its impact on crypto sentiment. Meanwhile, China’s recovery and oil market fluctuations add complexity to the global outlook. Investors should prepare for heightened volatility as major decisions loom.
Monday's Pre-Market Movers
| F (Ford Motors) | The automaker fell 2.1% after Jefferies downgraded shares to underperform from hold. The firm mentioned concerns of an inventory overhang along with valuation. |
| HON (Honeywell) | The industry giant saw shares rising 3% in premarket trading after the company said that its board is exploring the possibility of separating its aerospace division. |
| SMCI (Super Micro Computer) | Shares lost nearly 14% following a Friday Bloomberg report that the data center company had hired investment bank Evercore ISI to help it raise equity and debt capital. This comes after Super Micro missed deadlines to file its annual and quarterly financial reports. Concerns have now grown that the company might be delisted by the Nasdaq, despite CEO Charles Liang’s reassurances that this will not happen. |
| MCHP (Microchip) | The semiconductor products stock declined 2.5% following a downgrade by Bank of America to underperform from neutral. |
| MSTR (MicroStrategy) | The bitcoin proxy stock rose 3.8% after Nasdaq announced its addition to the tech-heavy Nasdaq-100 index. |
| AXON (Axon) | The weapons manufacturer added nearly 3% on the news that the stock will be joining the Nasdaq-100 later this month. |
| KEYS (Keysight Technologies) | The electronics manufacturer gained 2% following an upgrade at JPMorgan to overweight from neutral. The bank cited a broader cyclical recovery as well as Keysight’s Spirent acquisition — which should provide the company greater leverage and a strong margin improvement cadence — as catalysts. |
| MU (Micron Technology) | Shares rose nearly 4%. The semiconductor manufacturer is set to report quarterly earnings after the bell Wednesday. JPMorgan said in a note Monday it expects strong results. |
| AVGO (Broadcom) | The semiconductor company climbed 3%, putting it on track to add to its sharp gains from the previous session. Broadcom surged more than 24% on Friday after it reported better-than-expected fourth-quarter results, pushing its market cap above $1 trillion for the first time. |
| CPRI (Capri Holdings) | Shares rose 3.3% after Women’s Wear Daily reported that the retail company is working with Barclays to explore potential buyers for its Versace and Jimmy Choo brands. |
Fed Rate Cut, Bitcoin Surge, and Market Shifts: Key Investor Insights
The Federal Reserve's final meeting of the year is set to deliver another 25-basis-point rate cut, marking the third straight reduction in 2024. But while this move is widely expected, investors are more focused on the Fed's plans for 2025. Speculation is mounting that rate cuts next year will be slower than previously forecast.
Goldman Sachs now expects the Fed to hold rates steady at its January meeting, revising earlier predictions for another cut. Analysts point to a stronger labor market and persistent inflation as factors driving this cautious stance. While unemployment is lower and inflation higher than earlier Fed forecasts, Goldman says these deviations aren't as drastic as they appear.
The Fed's updated summary of economic projections, due this week, will be a key signal for markets. The previous forecast suggested four rate cuts in 2025, but analysts expect the central bank to hint at a more measured pace. Goldman predicts cuts of 25 basis points in March, June, and September, with a terminal rate of 3.5% to 3.75%.
Stock Market Cautious Before Fed Decision
U.S. stock futures edged higher on Monday, but trading remained cautious. By 04:00 ET, Dow futures were flat, S&P 500 futures rose 0.1%, and Nasdaq 100 futures gained 0.1%. Wall Street is coming off a sluggish week where the Dow Jones fell for seven consecutive days, its longest losing streak since April.
All eyes are on the Federal Reserve's decision this week. Traders will also watch preliminary PMI data set to be released before the market opens. On the corporate front, MicroStrategy could grab attention after being added to the Nasdaq 100 index, potentially boosting its trading volume and investor interest.
Oil Prices Retreat on China Woes, Fed Uncertainty
Oil prices fell Monday as weak Chinese economic data raised concerns about demand from the world's largest crude importer. By 04:00 ET, U.S.:
| WTI (Crude Oil) | Crude was down 1.5%, trading at $70.28 per barrel. |
| Brent Crude | Brent crude slipped 0.7% to $74.00 per barrel. |
Both benchmarks had posted strong gains the previous week, driven by new EU sanctions on Russian oil and expectations of tighter restrictions on Iranian supply. But weak demand from China, combined with caution ahead of this week’s Federal Reserve meeting, prompted a pullback.
Last week, the International Energy Agency highlighted that China’s oil demand has been contracting, raising fears of oversupply in 2025. Investors will be watching how the Fed’s policy shift might impact the global growth outlook and, by extension, energy demand.
China's Recovery Faces Hurdles, More Stimulus Likely
Fresh data from China underscores the uneven nature of its economic recovery. Industrial production grew as expected in November, aided by Beijing’s recent stimulus efforts. However, retail sales missed forecasts, reflecting continued weakness in consumer demand.
Adding to the challenge, Chinese home prices continued to decline, signaling a broader slowdown in the real estate sector. These figures highlight the difficulty Beijing faces in stabilizing the economy, especially as potential U.S. trade tariffs loom under a possible second Trump administration.
In response, analysts expect China to roll out more consumer-focused stimulus measures to spark demand. Moody's raised its 2025 GDP growth forecast for China to 4.2%, up from 4.0%, citing stable credit conditions and Beijing’s policy support since September.
About The Author
Alex Vellor
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