Here is Schwab's early look at the markets for Monday:
Following what was an uneven week for stocks, investors will be paying attention in the next few days to a series of important economic reports and the last meeting of 2024 for Federal Reserve policymakers. The Federal Open Market Committee meeting that takes place Tuesday and Wednesday is likely to be the main event for this week, and traders are widely expecting a quarter-point rate cut in the target fed funds rate.
Already this year, the FOMC has lowered rates by 75 basis points to the current rate band of 4.5%-4.75%. With another reduction of 25 basis points, the range would decline to 4.25%-4.5%. Kathy Jones, managing director, Chief Fixed Income Strategist at the Schwab Center for Financial Research, agreed with the market's consensus view for this week's meeting and also highlighted the importance of the Fed's statement that will accompany the decision at midweek. "The Summary of Economic Projections (SEP) along with the dot plot will be key for the markets," Jones said. "We expect the median estimate for rate cuts in 2025 to come down and the terminal rate to rise. The statement will likely indicate confidence that the economy is doing well and the job market is still healthy, if not as robust as it was a few months ago. However, there may be some cautious words about inflation being slow to reach target."
Reviewing how the major indexes performed on Friday, the S&P 500 eased 0.16 points (0.0%) to 6,051.09; the Dow Jones Industrial Average® , in the midst of a losing streak, declined 86.06 points (0.2%) to 43,828.06; but the Nasdaq Composite® rose, climbing 23.88 points (0.12%) to 19,926.72. One of the notable winners during the last session was semiconductor company Broadcom, which jumped 24% after it reported its latest results that included a sizable advance in AI revenue growth.
Nathan Peterson, director of Derivatives Analysis at the Schwab Center for Financial Research, pointed out that money going into mega caps has led to some contraction in market breadth. However, he notes that narrow leadership has been a familiar theme for markets for several years, so it's not too concerning at this point. "For now," he says, "the bull thesis around a strong economy still appears to be intact and is supported by a near-term bullish set-up -- bullish seasonality, relatively bullish technicals, along with the potential for year-end performance chasing by money managers." However, he also notes that yields on the 10-year were up last week and are approaching 4.50%, a level which triggered selling pressure in stocks in mid-November, so this bears monitoring near-term.
Back to this week, key events get underway Monday, including the S&P Global Purchasing Managers' Index data from Europe. In the U.S., noteworthy reports that will arrive in the days to come include Personal Consumption Expenditures, or PCE, prices, a series that's closely watched by the Fed. Also on the calendar are housing starts and the University of Michigan Consumer Sentiment Index.
On the corporate earnings side, a few well-known companies are expected to issue quarterly reports during what will be the last full trading week of 2024. Following Broadcom, another semiconductor company is expected to report, this time Micron. Also expected are results from homebuilder Lennar, athletic gear maker Nike and package delivery company FedEx.
