Wall Street traded slightly lower on Monday, kicking off the final week of the year with a negative tone as investors locked in gains from a largely positive fourth quarter. Attention remains on the Federal Reserve’s future moves, while Bitcoin continues to pull back from its recent all-time high.
Is the Fed’s Next Rate Cut Coming in March?
The Federal Reserve recently reduced interest rates by 25 basis points, completing a full percentage point of cuts since September. However, its updated projections suggest a more restrained approach to easing in 2025.
Fed officials now anticipate only two rate cuts next year, down from the four previously forecasted in September. Additionally, 15 out of 19 policymakers see inflation risks exceeding current projections.
The Core PCE inflation rate, a critical metric for the Fed, is expected to reach 2.5% by early 2025, staying above the 2% target if current trends hold.
Goldman Sachs forecasts the Fed’s next rate cut, another 25 basis points, will likely occur in March 2025. This is projected to be followed by additional 25 basis point reductions in June and September. However, the firm cautions about potential risks tied to geopolitical events and U.S. policy changes, such as higher tariffs on Chinese goods, reduced immigration, and tax reforms under the incoming Trump administration.
Key data points this week include weekly jobless claims on Thursday, ISM manufacturing PMI on Friday, and remarks from FOMC member Thomas Barkin.
2. Futures Dip as Investors Lock in Profits
U.S. stock futures slipped on Monday as investors took profits following a largely positive year.
As of 03:45 ET (08:45 GMT), Dow futures were down 85 points, or 0.2%, while S&P 500 futures fell by 11 points, or 0.2%, and Nasdaq 100 futures dropped 40 points, or 0.2%.
The major indices are on track to end 2024 near record highs. The S&P 500 and Dow Jones Industrial Average have climbed over 25% and 14%, respectively, marking their strongest performance since 2021. Meanwhile, the NASDAQ Composite is up more than 31%.
All three benchmarks are poised to post a winning fourth quarter, bolstered by Donald Trump’s election victory. The Nasdaq is set to notch its longest quarterly winning streak since Q2 2021.
On the economic front, Monday’s agenda includes November’s pending home sales and the December Chicago PMI. However, trading activity may remain subdued with markets set to close on Wednesday.
3. Japan’s Manufacturing PMI Shows Signs of Stabilization
Japan’s factory activity contracted at a slower pace in December, signaling a move closer to stabilization, according to a private survey released Monday.
The final au Jibun Bank Japan Manufacturing PMI rose to 49.6 in December, slightly below the 50.0 mark that separates growth from contraction. This marks the sixth consecutive month of contraction but shows improvement from the flash reading of 49.5 and November’s 49.0.
The Bank of Japan maintained its interest rates at 0.25% earlier this month, with Governor Kazuo Ueda prioritizing further data analysis and awaiting clarity on the incoming U.S. administration’s economic policies before considering another rate hike.Bank of Japan: Possible Rate Hike on the Horizon
While the Bank of Japan opted to keep rates steady at 0.25% earlier this month, some policymakers see favorable conditions emerging for an imminent rate hike. Continued signs of economic recovery could strengthen the case for a potential rate increase as early as January.
4. Pantera Capital Predicts Major Bitcoin Upside
Bitcoin dropped on Monday amid subdued year-end trading and rising U.S. Treasury yields following the Federal Reserve’s recent hawkish policy stance.
The yield on the benchmark 10-year U.S. Treasury note reached a seven-month high last week and remained near that level on Monday at 4.625%. As of 03:45 ET, Bitcoin was down 1.6% at $93,817.0, marking a 4% decline for the month after retreating from its December 17 record high of $108,379.28. However, it has still surged roughly 120% in 2024.
Despite this pullback, Dan Morehead, founder of hedge fund Pantera Capital, remains bullish on Bitcoin’s long-term potential. Morehead emphasized that Bitcoin’s historical performance—doubling in value annually over the past 11 years—and its role in driving broader technological and economic transformation underpin its continued growth.
Morehead predicts Bitcoin’s market capitalization could reach $15 trillion by 2028, representing a staggering 10,000% increase. He also expects the number of Bitcoin users to expand from 300 million currently to as many as 5 billion over the next decade.
5. Oil Prices Dip in Quiet Holiday Trading
Oil prices edged lower on Monday in thin holiday trading as the year winds down. By 03:45 ET, U.S. crude futures (WTI) were down 0.4% at $70.34 per barrel, while Brent crude slipped 0.4% to $73.50 per barrel.
Both benchmarks are set to end 2024 with significant losses. WTI has dropped approximately 1.5%, while Brent is down over 4%, driven by concerns over slowing demand in China, the world’s largest oil importer.
OPEC and the IEA have both forecast slower global oil demand growth in 2025, largely due to weakening demand in China. Investors will closely watch China’s PMI factory data, due Tuesday, for further insights into the country’s economic recovery. Additionally, Reuters reported that Chinese authorities plan to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025 to stimulate economic growth.
