The S&P 500 sat at just over 6,870 this morning, a few points below its all-time high of 6,890.89, and futures are flat before the opening bell in New York. Traders are holding their breath until Wednesday, when the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve has its December meeting, at which Chair Jerome Powell is widely expected to deliver an interest rate cut of 0.25%. The CME FedWatch futures index shows an 87.4% chance that the Fed will make that cut.
Until then, don’t expect much from the markets. Asian markets were mostly up this morning, and Europe was flat. The VIX “fear” index (which measures volatility) is down 10.33% over the past five sessions.
“All roads this week will point to Wednesday’s FOMC,” Jim Reid and his colleagues at Deutsche Bank told clients this morning. If the Fed reduces rates to the 3.5% level that would be six cuts since September 2024, they said.
The market will get moving again once it digests Powell’s statement and his remarks to the press. Recently, Fed members have suggested they are more worried about weakness in the labor market than they are about rising inflation—which is why that rate cut feels locked in. Any change in tone could move Wall Street into risk-off mode.
