Market Caution Ahead of Fed Announcement
As the Federal Reserve prepares to make its final policy announcement of the year, investors are exercising caution, leading to a retreat in U.S. stocks. The Dow Jones Industrial Average dropped for a ninth consecutive session, falling 267.58 points, or 0.61%, to 43,449.90.
Solid Consumer Spending Boosts Economy
Despite the market jitters, economic data indicates that consumer spending remains solid. U.S. retail sales increased more than expected in November, driven in part by an acceleration in motor vehicle purchases. This suggests strong underlying momentum in a resilient economy.
Fed’s Policy Announcement Takes Center Stage
Investors are largely focused on the Fed’s policy announcement, with almost all market participants pricing in an interest rate cut of 25 basis points. However, the real attention will be on the Fed’s summary of economic projections (SEP) and comments from Chair Jerome Powell, which may indicate how aggressive the U.S. central bank will be in cutting rates in 2025.
Uncertainty Reigns
“This is just a normal day ahead of the Fed announcement, where there’s a bit of uncertainty,” said Jason Ware, chief investment officer at Albion Financial Group. “Everyone knows we’re getting 25 bps, but what Powell will say at the press conference and what the SEP will tell us, those things people are not quite sure of, so you have a little bit of jitters ahead of that.”
Market Performance
The S&P 500 slid 23.47 points, or 0.39%, to 6,050.61, while the Nasdaq Composite dropped 64.83 points, or 0.32%, to 20,109.06. The Nasdaq hit a record high on Monday, and the S&P 500 is up nearly 27% on the year, but the Dow has struggled recently.
Sector Performance
Nearly all of the 11 major S&P sectors were lower on the day, led by a 0.9% drop in industrials. Consumer discretionary was the sole advancer, lifted by a 3.6% gain in Tesla after Mizuho hiked its price target on the stock.
Volatility Index Rises
The CBOE Volatility Index, Wall Street’s “fear gauge,” rose above 15 for the first time in nearly three weeks to close at 15.87, its highest since Nov. 21. The small-cap Russell 2000, seen as more sensitive to higher interest rates, dropped 1.2%.
Pfizer Jumps on Profit Forecast
Pfizer jumped 4.7% after the drugmaker forecast 2025 profit roughly in line with Wall Street expectations.
Market Breadth
Declining issues outnumbered advancers by a 2.77-to-1 ratio on the NYSE and a 1.79-to-1 ratio on the Nasdaq. The S&P 500 posted 11 new 52-week highs and 19 new lows, while the Nasdaq Composite recorded 81 new highs and 197 new lows. Volume on U.S. exchanges was 16.17 billion shares, compared with the 14.11 billion average for the full session over the last 20 trading days.
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