Monday's session on Wall Street ended with slight declines after several days of gains in a row. Investors are increasingly convinced that the Fed will decide to cut interest rates again this year at Wednesday's meeting.
The Dow Jones Industrial dropped 0.45% at the close. and amounted to 47,739.32 points. The S&P 500 fell by 0.35% at the end of the day. and amounted to 6,846.51 points. The Nasdaq Composite fell 0.14%. up to 23,545.9 points The Russell 2000 index of mid-cap companies is down 0.02%. up to 2,520.99 points The VIX index increases by 8.11%. up to 16.66 points
U.S. 10-year Treasury yields are rising despite the likelihood that the Fed will cut prices this week as investors worry about the state of inflation in the new year and whether the central bank will be able to further ease monetary policy.
Traders have been increasingly hopeful in recent weeks that the Fed will cut interest rates again in December after cutting them by a quarter of a percentage point at its meetings in September and October.
According to CME's FedWatch tool, federal funds futures price about 90 percent. chances of reducing interest rates, compared to 67 percent a month ago.
– Everyone now expects the Fed to cut rates, but what will be more important is how many voices of opposition there are. This may be one of the first meetings in history where the decision will be divided into seven people in favor of a cut and five against, which will be an important signal for expectations regarding a rate cut next year, said Nabil Milali, portfolio manager at Edmond de Rothschild Asset Management.
“We will be watching very carefully how Fed members expect to behave next year and whether interest rate cuts will be supported by the most hawkish FOMC members.” The Fed may also change its tone to a more cautious one, which could disappoint the market and reduce appetite in global financial markets – said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The Federal Open Market Committee hasn't had three or more dissenting votes at a meeting since 2019, and it has happened nine times since 1990.
Michael Feroli, head of the US economy at JPMorgan, wrote in a report that he expected at least two dissenting voices in favor of no cut. Feroli also indicated that the Fed would cut interest rates in January to protect against continued weakness in the labor market, and then pause monetary policy for a longer period of time.
Growing optimism among investors about further monetary easing was reflected in growth stocks, which posted a second consecutive positive week. “The market movement you've seen over the last week or two has essentially priced in the very high probability of a 25 basis point rate cut,” said Stephen Kolano, chief investment officer at Integrated Partners.
Beyond the anticipated cut, Kolano expects Fed Chair Jerome Powell to emphasize a data-driven stance in the coming months, especially as last week's November ADP data showed an even greater slowdown in the labor market. Moreover, Powell's term expiring in May 2026 could make him “somewhat neutral” about market expectations for next year's interest rate path.
“I wouldn't be surprised if Jerome Powell says, 'We've cut, and now we really need to watch the data,' and he stops just short of being hawkish because we've seen weakness in the labor market,” said the investment chief at Integrated Partners. – If you start to see interest rate cuts being pushed further into the [2026]in my opinion, in the first half of the year we will start to see greater negative pressure on the market – he added.
Paramount approached WBD shareholders directly with a cash offer of $30 per share. That's the same offer WBD rejected last week, which gives it an enterprise value of $108.4 billion.
The offering is supported by equity financing from the Ellison family and private equity firm RedBird Capital and $54 billion in debt commitments from Bank of America, Citi and Apollo Global Management.
Part of the equity financing comes from external financial partners in the Middle East, including the Saudi Arabia Public Investment Fund, L'imad Holding Company PJSC of Abu Dhabi and the Qatar Investment Authority. Another part comes from Jared Kushner's Affinity Partners. Kushner is the son-in-law of US President Donald Trump.
Paramount shares rose 7% and Warner Bros. shares rose 7%. Discovery rose by about 5%.
The loser in this competition may be Netflix, which on Friday announced a deal to acquire the studio and streaming assets of WBD for a combination of cash and stock, valued at $27.75 per WBD share, or $72 billion. Netflix shares lost more than 3% on Monday.
Technology companies were a strong point of Monday's session. Broadcom shares rose 2%. and hit a new record high after The Information reported that Microsoft was talking about designing custom chips. Oracle shares rose almost 1%. on a wave of investor optimism ahead of the company's quarterly results on Wednesday.
Tesla shares fell more than 3%. after Morgan Stanley downgraded the electric vehicle maker's stock to “overweight” from “overweight.”
On the oil market, WTI contracts for January are down by 2.03%. to USD 58.86 per barrel, and January Brent futures fall by 1.99%. up to USD 62.48/b. (PAP Business)
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