US Stocks Gain as Traders Await Key Rate Decisions: Markets Wrap

This content was published on December 16, 2024 - 16:41

5 minutes

(Bloomberg) — US stocks climbed as traders geared up for interest-rate decisions by major central banks across the globe due later this week. Bitcoin hit a fresh record.

The S&P 500 jumped 0.4% and the Nasdaq 100 rose 1%. Treasury yields nearly erased earlier declines after data showed activity at US service providers expanded at the fastest pace since October 2021.

Sentiment in the US is relatively sanguine, with an expected quarter-point rate cut from the Federal Reserve on Wednesday seen as adding fresh support and extending stocks’ outperformance. That stands in contrast to losses in Asia and Europe after weaker-than-anticipated retail data in China.

In the US, “near-term momentum may depend on what Fed Chair Powell says after the announcement, and whether retail sales or the PCE Price Index catch the market off guard,” said Chris Larkin, manging director, trading and investing, at E*Trade from Morgan Stanley.

Historically, most of the stock market’s December gains tend to come in the second half of the month, he said, adding that the S&P 500 had a positive net return in this period 78% of the time since 1957.

Wednesday’s Fed decision will be followed by policy announcements in Japan, the Nordics and the UK over the following day. Swaps traders are now pricing in around three quarter-point rate cuts by the Fed over the next 12 months, whereas they’d seen better than 50/50 odds of a fourth one a week ago.

Bloomberg’s dollar index fluctuated between being little changed and posting modest gains. After strengthening more than 6% so far this year, Wall Street is starting to sour on the greenback as Trump’s policies and the Fed’s interest-rate cuts are seen to put pressure on the currency in the latter portion of 2025.

The dollar’s strength has been “stomach churning,” said Kit Juckes, the head of currency strategy at Societe Generale. “We’re driving the price of an asset up to something that is not sustainable over the long-term.”

Roughly a half dozen sell-side strategists are now forecasting the world’s reserve currency will peak as early as mid next year before starting to decline.

In China, retail sales increased 3% in November from a year ago, falling short of forecasts for 5% growth by economists surveyed by Bloomberg. The data builds on traders’ disappointment last week when Beijing pledged to boost consumption but failed to offer details on fiscal stimulus.

The retail-sales data “is a reflection of the dire situation there and how the stimulus efforts have prioritized optics over delivering meaningful economic improvements,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Even for a tactical recovery, we need more after a series of false starts and the risk of tariffs ahead.”

French bonds lagged peers after Moody’s Ratings cut the country’s credit rating, putting more pressure on officials after far-right leader Marine Le Pen toppled the previous prime minister over a budget dispute.

German lawmakers voted to support a measure that will pave the way for a national election in two months, backing Chancellor Olaf Scholz’s plan to end his embattled administration. Meanwhile, euro-area private-sector activity shrank less than anticipated thanks to a bigger-than-expected contribution from services.

Oil slipped after China’s latest economic data reinforced concerns over weakening demand in the biggest importer. Cocoa futures reached a fresh record in New York as the market grapples with renewed supply concerns.

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