U.S. stock markets continued to decline on Tuesday, following the negative trend of their European counterparts, while crude oil prices also fell. Investors are assessing the latest economic data and preparing for upcoming monetary policy decisions, with particular focus on the anticipated interest rate cut by the Federal Reserve (Fed).
“It’s a breather for most of the market,” said Paul Nolte, wealth advisor and market strategist at Murphy & Sylvest in Illinois. “Indexes are hovering near all-time highs, and there’s been a big divergence between growth and value as well as between large and small-cap companies. These themes, evident in the first half of the year, have reemerged in the final trading days of 2024.”
Global Expectations
This week, central banks in Japan, Britain, Sweden, and Norway are also scheduled to meet. While the Bank of Japan, the Bank of England, and the Norges Bank are expected to hold rates steady, Sweden’s Riksbank is projected to implement a rate cut.
In the U.S., the Federal Open Market Committee began its two-day meeting, which will conclude on Wednesday with a 25 basis-point cut to the federal funds target rate. Markets will closely examine the Summary of Economic Projections, where expectations for further rate cuts in 2025 could be scaled back due to persistent inflation and robust economic data.
Robert Pavlik, portfolio manager at Dakota Wealth, noted that this rate cut aligns with market expectations: “The Fed has been supported by previous commitments and by the market.” However, he anticipated a potential pause going forward: “I’d prefer an aggressive cut now rather than no cut at all.”
Mixed Economic Data
The contrast between U.S. economic strength and China’s weakness was evident. A stronger-than-expected retail sales report in the U.S. reinforced perceptions of solid economic momentum, while China’s retail sales data triggered concerns about global demand.
As a result, major Wall Street indices closed lower:
- Dow Jones: lost 345.96 points (-0.79%), closing at 43,371.52.
- S&P 500 (SPX): fell 30.82 points (-0.51%) to 6,042.81.
- Nasdaq Composite (IXIC): declined 79.13 points (-0.39%) to 20,094.76.
In Europe, markets hit two-week lows due to weakness in the energy and healthcare sectors, combined with uncertainty surrounding central banks. The STOXX 600 dropped 0.42%, while the FTSEurofirst 300 fell 0.38%.
Emerging markets also felt the pressure, with the MSCI index falling 0.83%.
Fixed Income and Currencies
U.S. Treasury yields for the 10-year bond retreated from three-week highs. The yield on the 10-year Treasury dropped to 4.385%, while the 30-year yield fell to 4.5798%.
In currency markets, the dollar rose slightly. The dollar index gained 0.13%, while the euro slipped 0.18%. Against the Japanese yen, the dollar weakened to 153.32.
Bitcoin and Commodities
Bitcoin reached a new all-time high, driven by U.S. President-elect Donald Trump’s proposal to create a strategic reserve of the cryptocurrency. BTC rose 0.25%, trading at $106,344.00.
Conversely, oil prices fell amid concerns over global demand. WTI crude dropped 0.89% to $70.08 per barrel, while Brent crude fell 0.97% to $73.19 per barrel.
Gold, pressured by the dollar’s strength, also declined as investors adjusted their expectations for the pace of rate cuts in 2025.
