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The Dow Jones Industrial Average (DJIA) spun in a tight circle near 48,000 on Thursday before retreating around 200 points. Equity markets are taking a break and slowing their momentum through the back half of the trading week as investors’ focus remains fully pinned on the upcoming Federal Reserve (Fed) interest rate decision slated for next week.

Fed rate cut expectations dominate

Markets remain fully committed to expecting a third straight interest rate trim from the Fed on December 10. According to the CME’s FedWatch Tool, rate traders are pricing in nearly 90% odds of a quarter-point rate cut next week. Official datasets are still lagging well behind the curve as federal agencies struggle to play catchup following the longest US federal government shutdown in history. Recent private datasets have teased that the US labor market could be crumbling further heading into the year’s end, keeping trader expectations of further rate cuts on the high side.

US data supports further rate moves

Challenger job cuts fell back in November, declining to 71.3K after the previous month’s eye-watering 153K headline figure. Still, the figures are hiding some particular gloomy clouds. November’s layoff figures are 24% higher than at the same time in 2024, and the year-to-date job cuts figure of 1.17 million stands as one of the worst non-recession years on record.

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Before the Fed can gather to deliberate on interest rates, the latest Personal Consumption Expenditures Price Index (PCE) inflation report will drop on Friday. The figures are from September, and are far too backdated to be immediately relevant to the Fed’s deliberations for a December interest rate cut. However, a hard upswing, even in old data, could throw a wrench in the works for a third straight interest rate trim.

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Dow Jones daily chart

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