Wall Street: the Fed, last hurdle of the year

(CercleFinance.com) - Wall Street is expected to be on a weak note on Monday morning, ahead of the release of inflation figures and, above all, the kick-off of the Fed's last meeting of the year, which should provide valuable clues as to the direction of interest rates.


Futures contracts on New York's major indices currently look set to see both the Dow Jones and the Nasdaq down by almost 0.1% at the opening.

This wait-and-see mood is likely to last at least until tomorrow, when monthly consumer price data are released, showing a further moderation in inflation in November.

While the expectation of this statistic should limit movements, investors' attention will turn mainly to the Fed meeting, amid a chorus of calls to cut rates.

Investors know that these two major meetings should provide elements on the trajectory of rates, while the market is now counting on only a 38% probability of a reduction in the cost of credit in March, compared with 51% a week ago, according to the Fedwatch barometer.

Despite the encouraging data on inflation, the resilience of employment should nevertheless push the Fed to remain vigilant and moderate investors' expectations of rate cuts," explains Franck Dixmier, at Allianz Global Investors.

With Wall Street now on a six-week winning streak, this week's news could push US markets to new all-time highs or, on the contrary, mark the end of the year-end 'rally'.

If Fed Chairman Jerome Powell turns out to be more restrictive than the markets expect, this could lead to a pullback in risky assets after last month's solid gains", warns Larry Adam, Raymond James' Chief Investment Officer.

In the context of caution ahead of the Fed meeting, government bonds are a little less sought-after, and the 10-year Treasury yield has risen by almost three basis points to 4.27%.

The dollar is back on a downward trend after rising in recent weeks ahead of the Fed's announcements, which could herald the first rate cuts next year.

The prospect of an increasingly oversupplied world market due to the slowdown in global economic activity is preventing any real recovery in oil prices.

The price of a barrel of US light crude (West Texas Intermediate, WTI) is nonetheless showing a slight technical rebound, having hit lows since the beginning of the summer last week.

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