Federal Reserve Grinch Tries To Steal Christmas From Stock Market
The S&P 500 (Index: SPX) had a rough week just ahead of the Christmas and New Year holidays.
The rough going was courtesy of the grinches at the Federal Reserve, who did their best to steal Christmas from investors by putting the kibosh on the prospects for more than two interest rate cuts in 2025. Since we covered the immediate aftermath of their Scrooge-like pronouncements, all that's left to cover is what happened after that.
What happened after the Fed's final announcement of 2024 is the S&P 500 managed to recover one of the three percent it lost on Wednesday, 18 December 2024. The index closed at 5,930.87, down two percent from where it ended the preceding week.
After the Fed reduced the Federal Funds Rate by a quarter point to a target range of 4.25-4.50% and signaled they weren't planning more than two rate cuts in 2025, the CME Group's FedWatch Tool dropped all but one rate cut from its forecast for all of 2025. The remaining projected rate cut is a 0.25% reduction in the Federal Funds Rate on 7 May (2025-Q2).
Not uncoincidentally, that's the future quarter upon which investors are focusing their attention. The latest update shows the late week rebound in stock prices that falls within the range associated with 2025-Q2 that the dividend futures-based model has been projecting for the index.
Here is the full trading week's worth of market moving headlines:
Monday, 16 December 2024
- Signs and portents for the U.S. economy:
- Fed minions get some better economic data:
- Mixed economic signs developing in China:
- Bigger trouble developing in Japan, some hope on horizon:
- Bigger trouble developing in Eurozone less bad, Germany is worse:
- ECB minions thinking they should probably keep cutting Eurozone interest rates:
- Nasdaq logs record close, S&P up as Wall Street looks for final 2024 rate cut; Dow down
Tuesday, 17 December 2024
- Signs and portents for the U.S. economy:
- Bigger trouble, stimulus developing in China:
- BOJ minions expected to boldly do nothing with Japan's interest rates:
- ECB minion say they'll make Eurozone monetary policy up as they go:
- S&P, Nasdaq fall, Dow marks longest losing run since 1978 before Fed's last 2024 meeting
Wednesday, 18 December 2024
- Signs and portents for the U.S. economy:
- Fed minions cut rates, dial back plans for more rate cuts because of persistent Bidenflation:
- BOJ minions seek answers to philosophical questions:
- Nasdaq slides more than 2%, yields jump as Fed sees fewer rate cuts, stresses caution
Thursday, 19 December 2024
- Signs and portents for the U.S. economy:
- Oil drops as dour economic outlook adds to oversupply concerns
- Philly Fed's manufacturing gauge slumps to 20-month low
- US existing home sales jump to eight-month high in November
- US mortgage rates rise after three straight weekly declines
- Seeing low-income consumers squeezed, retailers target $10 and under gifts
- Fed minions causing problems elsewhere in the world:
- Central banks taking other actions, or not, with their interest rates:
- ECB minions claim they don't need to stimulate Eurozone economy:
- Wall Street rebound fizzles out, but Dow snaps longest losing streak since 1974
Friday, 20 December 2024
- Signs and portents for the U.S. economy:
- Fed minions try to explain why they've gone cold toward rate cuts in 2025:
- BOJ minions sad they can't keep never-ending stimulus alive:
- Stocks rally after inflation data but close lower for the week
The Atlanta Fed's GDPNow tool's projection of the real GDP growth rate for the current quarter of 2024-Q3 declined to +3.1% from the previous week's +3.3% annualized growth estimate.
Looking ahead, the next weeks should be relatively quiet in terms of market moving news for the markets, which will hopefully provide the conditions needed to deliver a traditional Santa Claus rally. We'll pick up the plot in the new year with the first 2025 edition of the S&P 500 chaos series on Monday, 6 January 2025.
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