US stocks continue to falter as traders factor in fewer interest cuts next year
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US stocks are meandering towards the end of one of their most dismal weeks of the year. The S&P 500 dipped 0.1%, continuing to falter after the Federal Reserve indicated on Wednesday that it may implement fewer interest rate cuts next year than initially anticipated.
Meanwhile, the Dow Jones Industrial Average inched up 52 points, or 0.1%, as of 9:40am. Eastern time, and the Nasdaq composite slipped 0.5%. Although stocks are still near their all-time highs reached in recent weeks, the surge was partly driven by expectations of consecutive rate cuts next year.
However, traders are now mostly betting on just one, two, or possibly no rate cuts in 2025, according to CME Group data. "When optimism is rising and market multiples are expanding, it just takes a little fear to take the veneer off a market rally," warned Brian Jacobsen, chief economist at Annex Wealth Management.
Critics had argued that stock prices were susceptible to declines after reaching such lofty heights, and that they would need everything to go smoothly to justify this year's substantial gains. Apart from the dashed hopes for multiple rate cuts next year, Wall Street received another reminder late Thursday that things may not go as planned.
The House of Representatives has overwhelmingly dismissed President-elect Donald Trump's proposal to keep the US government fully operational, casting doubt on future proceedings and signalling potential dysfunction in Washington despite Republican control over the House, Senate, and White House. The US stock market has nearly wiped out its gains since Trump's Election Day victory, which had initially sparked optimism for swifter economic growth and relaxed corporate regulations.
