Investing.com — Wall Street is expected to trade slightly lower on Monday, starting the final week of the year on a negative note as investor banks profited from a generally positive last quarter. Future moves by the Federal Reserve will be in focus as bitcoin retreats further from its all-time high.
1. Fed’s next rate cut in March?
It cut rates by a quarter of a point earlier this month, completing a full percentage point cut since September, but updated forecasts point to a more cautious stance on easing in 2025.
Most officials now forecast just two cuts next year, down from the four projected in September, and notably 15 of 19 Fed officials see a risk that inflation could exceed projections.
Core PCE inflation, a key gauge for the Fed, is forecast to reach 2.5% by early 2025 if recent trends continue, above the central bank’s 2% target.
Goldman Sachs recently forecast that the Federal Reserve will make its next 25 basis point interest rate cut in March 2025, adding in a note on Friday that the move is expected to be followed by two additional cuts of the same size in June and September.
However, the company highlights risks from geopolitical developments, particularly changes in US policy, including higher tariffs on China and cars, reduced immigration and new tax cuts under the incoming Trump administration.
This week the focus will be on Thursday’s weekly numbers and data a day later, as well as FOMC member comments.
2. Futures edge lower; taking profit before the end of the year
U.S. stock futures fell on Monday, with investors taking profits as a generally positive year comes to an end.
By 03:45 ET (08:45 GMT), the contract was down 85 points, or 0.2%, down 11 points, or 0.2%, and down 40 points, or 0.2%.
The major averages should close 2024 near record highs, with gains of more than 25% and 14%, respectively, and are on track for their best year since 2021. It gained more than 31%.
Benchmarks are also heading for a winning fourth quarter, following Donald Trump’s election victory, with the Nasdaq posting its longest three-month winning streak since the second quarter of 2021.
Monday’s economic data table includes November as well as December, but activity is likely to be limited as the market is closed on Wednesday.
3. Japan’s manufacturing PMI shows improvement
Factory activity in Japan contracted at a slower pace in December, according to a private sector survey on Monday, edging closer to stabilizing after recent declines.
Jibun Bank Japan’s final au rose to 49.6 in December, just below the 50.0 threshold that separates growth from contraction for the sixth straight month.
The index was slightly higher than 49.5 in the flash reading and 49.0 in November.
Interest rates were held steady at 0.25% earlier this month, with Governor Kazuo Ueda looking to examine more data and seek clarity on economic policy from the incoming US administration before committing to another rate hike.
However, some Bank of Japan policymakers saw the conditions building for an inevitable rate hike, and more signs of economic recovery could keep alive the chance for a January hike
4. Bitcoin has a big advantage – Panther
fell on Monday amid weak year-end trading volumes, weighed down by rising U.S. Treasury yields after the Federal Reserve turned hawkish at its latest policy meeting.
The benchmark 10-year U.S. Treasury note hit its highest level in more than seven months last week, with the yield hovering near that mark on Monday at 4.625%.
At 3:45 a.m. ET, Bitcoin was down 1.6% at $93,817.0, down about 4% from the previous month after retreating from a record high of $108,379.28 reached on December 17. It’s up about 120% so far this year.
However, despite these losses, Dan Morehead, founder and director of hedge fund Pantera Capital, believes that the story of digital assets is just beginning and that the number of users will grow greatly.
Bitcoin, the leading cryptocurrency, has doubled in value every year for 11 years, and Morehead is convinced that Bitcoin’s steady performance and its role in the bigger picture of technological and economic change is what’s driving it.
Morehead added that Bitcoin’s market cap could reach $15 billion by 2028, which would represent a 10,000% growth, with the number of people using the cryptocurrency jumping from the current 300 million to as many as 5 billion in the next 10 years.
5. Oil falls lower in holiday trade
Crude oil prices fell slightly on Monday in light trade influenced by the holiday at the start of the final week of the year.
By 03:45 ET, U.S. crude futures (WTI) were down 0.4% at $70.34 a barrel, while the contract was down 0.4% at $73.50 a barrel.
Both benchmarks are on course for big losses in 2024, with the WTI contract down about 1.5% and Brent down more than 4% year to date, largely on concerns about slowing demand in China, the world’s biggest oil importer .
Both OPEC and the IEA forecast slower demand growth in 2025 due to slowing demand in China, the world’s second largest economy.
Investors are eyeing China’s PMI factory survey, due on Tuesday, for further indications of the strength of the economic recovery, especially after Reuters reported that Chinese authorities had agreed to issue a record 3 trillion yuan ($411 billion) in special government bonds in 2025. . in order to stimulate economic growth next year.
