Market Volatility Ahead of Fed Rate Decision
As the Federal Reserve prepares to announce its highly anticipated rate decision, US stocks have taken a hit, with the S&P 500 and Nasdaq 100 both sliding 0.4%. The Dow Jones Industrial Average has posted its longest losing streak since 1978, sparking concerns among investors.
Consumer Resilience Shines Through
Despite the market downturn, data released earlier today showed that US retail sales increased at a firm pace in November, highlighting the resilience of American consumers. While this report didn’t alter expectations for a rate cut by the Fed this week, it has raised hopes that the central bank will prepare the market for a pause early next year.
Industrial Production Takes a Hit
However, industrial production data told a different story, unexpectedly declining for a third month in November. This has added to the uncertainty surrounding the Fed’s future moves, particularly in light of proposed inflationary import tariffs by the incoming administration of Donald Trump.
Fed Rate Cut Expectations
A quarter-point rate cut is widely expected, but the real question is what happens in the following months. Bank of America Corp. predicts the Fed will lower interest rates to 3.75%, while others believe strong economic data could bolster the case for the Fed to pause in January.
Global Market Trends
In Canada, inflation dropped below the central bank’s target for the second time in three months, giving officials confidence in their rapid rate cuts. However, political discord has pushed the loonie to a Covid-era low. Meanwhile, Brazil’s ballooning debt and deficits have sent the real to all-time lows, prompting its central bank to intervene in local markets.
Currency Markets in Flux
The yen snapped a six-day losing streak, while the Bloomberg Dollar Spot Index fluctuated throughout the session. The euro fell 0.2% to $1.0488, and the British pound rose 0.2% to $1.2709. Oil prices fell for a second day, and equity markets slipped, adding to the overall sense of uncertainty.
Key Events This Week
Investors will be keeping a close eye on key events this week, including the UK CPI and Eurozone CPI on Wednesday, the US rate decision on Wednesday, and the Japan rate decision on Thursday. Other notable events include the UK BOE rate decision, US revised GDP, and China loan prime rates.
Market Moves
Some of the main moves in markets include:
- Stocks: The S&P 500 fell 0.4%, the Nasdaq 100 fell 0.4%, and the Dow Jones Industrial Average fell 0.6%.
- Currencies: The Bloomberg Dollar Spot Index was little changed, the euro fell 0.2% to $1.0488, and the Japanese yen rose 0.4% to 153.55 per dollar.
- Bonds: The yield on 10-year Treasuries was little changed at 4.40%.
- Commodities: West Texas Intermediate crude fell 0.7% to $70.19 a barrel, and spot gold fell 0.3% to $2,643.85 an ounce.
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