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A television station on the floor of the New York Stock Exchange broadcasts Jerome Powell, chairman of the US Federal Reserve, speaking after a meeting of the Federal Open Market Committee on December 18, 2024.
Michael Nagel | Bloomberg | fake images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Do you like what you see? You can subscribe here.
What you need to know today
The Federal Reserve could force global banks to act
Wednesday’s indication from the US Federal Reserve that it is expecting fewer rate cuts in 2025 than previously expected caused turbulence in the markets and boosted the strength of the dollar. Global central banks insist their monetary policy is independent of the Federal Reserve, but such currency moves could force them to act.
Markets fall but the Dow breaks a losing streak
On Thursday, the S&P 500 and Nasdaq Composite fell marginally and the Dow Jones Industrial Average made a small profit break their losing streak. Asia-Pacific markets fell on friday. Australia S&P/ASX 200 fell 1.24% to a three-month intraday low before recouping some losses. The Chinese and Japanese markets fell after the publication of separate economic data from the agencies of both countries.
Interest Rate and Inflation Updates
The People’s Bank of China on Friday maintained its preferential rates for one- and five-year loans unchanged at 3.1% and 3.6%respectively. Meanwhile, Japan’s “core” inflation rate, which excludes fresh food and energy (and is tracked by the Bank of Japan) rose to 2.4% in November. That figure is the highest since April.
Partial shutdown of the US government?
A Republican House bill to fund the government for three months and suspend the debt ceiling for two years could not pass on Thursday night. Thirty-eight Republicans joined the majority of Democrats in voting against the dealwhich was endorsed by the president-elect of the United States, Donald Trump. Without an agreement and without legislation passed, a partial shutdown of the United States government will begin on Friday night.
(PRO) A ‘back up the truck’ moment
The S&P 500 plunged on Wednesday and continued to fall slightly on Thursday. But this is a time to “step back,” said Tom Lee, head of research at Fundstrat Global Advisors. This suggests that, on the contrary, now is a good time to buy shares. These are the trends Lee is analyzing supports your hypothesis.
The final result
Taking an objective look, the major US benchmarks did not change much during the trading session on Thursday.
The S&P 500 fell 0.09% and the Nasdaq Composite fell 0.10%, but the Dow Jones Industrial Average rose 0.04%.
But when viewed in the context of Wednesday’s market decline, the direction of those changes also gives an indication, albeit a weak one, of the narrative animating the markets.
To rephrase the stock market on Thursday in these terms: Most stocks continued to fall after the Fed released its projections, but the Dow finally snapped its 10-day losing streak.
It’s kind of a mix. Should investors continue to exercise caution given the downward trend? Or should they see the Dow Jones rally as a ray of light at the end of the tunnel?
As with everything that happens in the markets, there are no clear answers. The only thing that is more certain is that data, such as today’s US Personal Consumption Expenditure Price Index for November, will influence markets more strongly than before.
“Whatever the reaction is, it will probably be more severe in one way or another than it would have been before seeing the Fed really raise those expectations,” said Mike Dickson, head of quantitative research and strategies at Horizon Investments. , referring to the The Federal Reserve’s projection that the PCE will be higher than the central bank’s 2% target.
In fact, Wall Street’s fear gauge rose 74% to 27.62 on Wednesday, its second biggest jump in its history. And although the VIX cooled 12.8% on Thursday, it closed above 20, a sign of elevated levels of fear in the market.
It’s kind of ironic, but volatility might be the only thing that’s safer right now.
— CNBC’s Sarah Min, Sean Conlin, Brian Evans and Pia Singh contributed to this report.
