Stocks closed near record highs on Friday, with the S&P 500 just below 6,900 and a volatile outlook for the bond market.
Investors have a busy schedule ahead of them this week, with the last Fed meeting of 2025 and Chairman Jerome Powell’s press conference underlining the action.
On the corporate front, Wednesday sees quarterly results from Oracle (ORCL) and Adobe (ADBE), with Broadcom (AVGO) and Costco (COST) in focus on Thursday.
The economic calendar will continue last week’s labor market theme, with delayed October JOLTS data due to be released on Tuesday to shed light on hiring, firings and resignations.
Federal Reserve rate setters return to the conference room on Tuesday, with the public eagerly awaiting Powell’s statement and press conference on Wednesday and keeping a close eye on any clues about the Fed’s future policy.
Economic data last week showed cracks in the labor market, with data from ADP and Challenger, Gray & Christmas showing an increase in unexpected job losses and layoffs. Largely as a result of this weakness, investors are all but convinced that a quarter-point rate cut is imminent, from 3.75% to 4.00% to a new target of 3.50% to 3.75%.
Read more: How employment, inflation and the Federal Reserve are related
Personal consumption expenditures (PCE) data released on Friday showed inflation slowed in September, further solidifying market expectations.
But like a good movie, even if the ending is almost spoiled for us, there’s always something to chew on.
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First and foremost will be Powell’s comments and question-and-answer session at a news conference Wednesday at 2:30 p.m. ET. While the 2pm decision may not have impacted the market had the comments in the press release been strict, the more freewheeling format remains a blue-chip appointment viewing.
Markets will also receive this year’s final summary of economic forecasts, often referred to as a “dot plot,” which will outline rate setters’ outlook for the U.S. economy in the year ahead (and beyond).
There are some other interesting things about this meeting: First, it will be the last time rates will be set by the current makeup of voting members. The presidents of the Cleveland, Minneapolis, Dallas and Philadelphia Feds will rotate in, as will the presidents of Boston, Chicago, St. Louis and Kansas City.
Additionally, speculation about Powell’s successor has reached fever pitch in recent days, with President Trump promising to find a nominee early next year. Trump’s top economic adviser, Kevin Hassett, is largely seen as the favorite, although bond investors are uneasy about his potential appointment.
In the end, the best guess can only come down to the data that decision makers are working with – and as the cluttered departments dust themselves off again, post-shutdown data is either delayed, canceled or somehow asterisked.
Stocks closed higher on Friday as investors anticipated, and are now more certain of, a rate cut from the Federal Reserve on Wednesday.
But Bank of America strategist Michael Hartnett said that despite another record high, what appears to be the beginning of a “Santa Claus rally” to end the year could be in jeopardy.
Chef Jose Andres (left) poses with Santa Claus on the floor as the Dow closes on the New York Stock Exchange on December 5, 2019. (Photo by Brian R. Smith/AFP) (Photo by Brian R. Smith/AFP via Getty Images) ·BRYAN R. Smith via Getty Images
Of course, a rate cut would be welcome. But investors want it all: lower interest rates, a strong economy and slowing inflation. The problem, Harnett said, is that a dovish Fed rate cut could spook markets, causing bond yields to rise and stocks to fall.
That’s another reason to pay attention to Powell’s comments and economic forecasts from FOMC members. Circle your calendar.
As Hartnett and our 10-year bond quotes page (^TNX) make clear, the bond market will continue to be pressured by where the Fed goes in the year ahead. Yields rose further on Friday as the 10-year Treasury note rose more than 10 basis points as one of the worst weeks in months ended.
While Friday’s inflation data appeared to solidify Wednesday’s rate cut, the still-above-target reading cast doubt on a rate cut in 2026. Things Feel…Hawk – Even if Hassett does take over as Fed chair, markets are beginning to doubt his ability to deliver on Trump’s desire for rapid interest rate cuts.
That will be another question the Fed needs to answer on Wednesday, at least in the short term, as Friday’s inflation data holds the final say on earlier this week’s job warnings of layoffs and private wage losses.
The picture will finally take on more color on December 16th when the jobs report finally gets back on track with November’s data.
The idea that Bitcoin (BTC-USD) is digital gold has been true to some extent this year, as dollar outflows have been captured by the cryptocurrency at various times. (But this is even more true for real gold (GC=F), which is up nearly 60% this year.)
Even its critics have to give it to cryptocurrencies: It is currently a non-stock, non-cash store of value that has been worth between $75,000 and $120,000 this year.
But Bitcoin has a real history no Like gold, because it has always been influenced by risk sentiment, rising on the frenzy of tech bets and meme stocks, and fading when things turn more conservative. More simply, it typically moves in tandem with stocks.
This year, however, Bitcoin is expected to pivot away from equities for the first time since 2014, at least in a directional manner. Bitcoin’s losses continue as the S&P 500 Index (^GSPC) rises more than 16%. Even if it steps out of negative territory, the distinction can be a bit academic, as the major gap between the two performances is unusually large.
Friday was another pretty volatile day and Bitcoin remains on our watch list this week.
Economic data: New York Fed’s November one-year inflation forecast (previously 3.24%)
income: Toll Brothers (TOL), Children’s Home (PLCE)
Economic data: BLS releases JOLTS data for September and October; NFIB small business optimism, November (previously 98.2); JOLTS job openings, October; JOLTS job vacancy rate, October; JOLTS exit level, October; JOLTS exit rate, JOLTS layoff level, October; JOLTS layoff rate, October
income: AutoZone (AZO), Ferguson Enterprises (FERG), Casey’s General Stores (CASY), SailPoint (SAIL), GameStop (GME), The Campbell’s Company (CPB), Ollie’s Bargain Outlet Holdings (OLLI), Braze (BRZE), Cracker Barrel Old Country Store (CBRL), Dave & Buster’s Entertainment (PLAY)
Economic data: FOMC rate decision; MBA mortgage applications, week ended December 5 (previously -1.4%); Q3 employment cost index (0.9% expected, previously 0.9%); November federal budget balance (previously $284.4 billion)
Economic data: Initial jobless claims, week ended December 6; Continuing claims, week ended November 29; Wholesale inventories, month-on-month, September end of period reading; September wholesale trade sales month-on-month (previously 0.1%)
