NEW YORK, Dec 16 (Reuters) – The Nasdaq closed at a record high on Monday, and the S&P 500 also saw gains, as investors assessed the latest economic data. Attention is now shifting towards the Federal Reserve’s upcoming policy meeting, where a decision on interest rates will be made later this week.
The markets have largely priced in a 95.4% chance that the Fed will cut interest rates by 25 basis points (bps) after its two-day meeting ends on Wednesday. This expectation is based on data from CME‘s FedWatch Tool.
Expectations of a “Hawkish Cut”
Sam Stovall, Chief Investment Strategist at CFRA Research, explained that the market might have been “oversold” last week. With the near certainty of a rate cut, the key focus now is the Fed’s rhetoric. He said, “The only outstanding question is what kind of guidance investors will receive from the Fed.” Stovall believes the rate cut is likely to be “hawkish,” meaning that while the Fed will lower rates, it may emphasize that it remains “data-dependent,” signaling fewer cuts in the future than some investors expect.
Economic Data Shows Manufacturing Slowdown
On the economic front, S&P Global’s flash manufacturing PMI dropped to 48.3 in December, falling short of economists’ expectations of 49.8 and down from 49.7 in November. Additionally, a measure of factory production fell to its lowest level since May 2020. This decline comes as concerns rise over higher tariffs that could drive up the cost of imported raw materials in the coming year.
Market Movements
In terms of market performance, the Dow Jones Industrial Average dropped by 110.58 points, or 0.25%, closing at 43,717.48. Meanwhile, the S&P 500 rose by 22.99 points, or 0.38%, to finish at 6,074.08. The Nasdaq Composite surged 247.17 points, or 1.24%, reaching a new record of 20,173.89.
