The Dow Jones Industrial Average (DJI) gained some traction back on Wednesday, rising about 0.5% in early afternoon trading as it attempts to snap a nine-session losing streak — the longest since 1978. Meanwhile, the S&P 500 (GSPC) and Nasdaq Composite (IXIC) experienced more modest gains of 0.2% each, with tech stocks continuing to buoy broader markets.
The Federal Reserve's final interest rate decision of the year remains the day’s focal point, with investors anticipating a 25-basis-point rate cut. However, the Fed’s revised projections for 2025, including inflation and unemployment forecasts, could prove to be the real market-moving catalysts.
Market Movers:
- UnitedHealth Group (UNH): Shares of UnitedHealth Group rebounded 3% following a challenging two weeks that saw the stock plunge nearly 20% after CEO Brian Thompson's murder. Investors appear to be reassessing the company’s long-term fundamentals, with analysts highlighting strong revenue prospects despite leadership uncertainty. This rebound helped to offset some of the recent weakness in healthcare stocks, which have dragged down the Dow during its losing streak.
- Nvidia (NVDA): The AI giant’s stock climbed over 3.8% on reports of a potential new revenue stream in cloud services. According to The Information, Nvidia’s move to compete in AI-driven cloud computing could diversify its business and generate up to $150 billion in future revenue. This potential shift comes amid rising competition in the AI chip market, including from Nvidia’s own customers.
- Tesla (TSLA): Tesla continued its upward momentum, rising nearly 4% on Wednesday. The stock has surged more than 37% in December, fueled by optimism around vehicle delivery estimates and progress in artificial intelligence. Analysts point to Tesla’s growing dominance in EV markets and AI as key drivers of its recent rally, which has contributed significantly to the Nasdaq’s strength this month.
Fed Decision in Focus
The Federal Reserve's anticipated rate cut marks its third consecutive reduction this year. However, attention is shifting to the Fed’s Summary of Economic Projections (SEP), which will outline policymakers' updated outlooks for inflation, growth, and unemployment through 2025. Many analysts expect the Fed to project higher rates next year, given strong economic data and sticky inflation.
Chair Jerome Powell’s post-meeting comments are likely to be pivotal. Investors will be watching for clues on whether the Fed is nearing the end of its rate-cutting cycle or sees risks that could warrant more tightening in the future.
Housing Starts Hit Four-Month Low
In housing data, November saw a 1.8% decline in housing starts, the lowest level since July, driven by a sharp 24% drop in multifamily projects. Single-family starts, however, rose 6.4%, signaling strength in that segment. Economists suggest this shift could improve housing affordability in 2024 if mortgage rates continue to decline.
Despite these gains, the outlook for builders remains mixed as inventory levels of new homes reach a 17-year high. Analysts believe the surge in supply could limit further upside for construction activity in the near term.
Looking Ahead
Markets remain cautiously optimistic as they await the Fed’s decision and guidance later today. A dovish shift in the central bank's tone could ignite a year-end rally, often referred to as the "Santa Claus rally." However, any deviation from expectations — particularly regarding rate cuts in 2025 — could inject volatility into markets.
Investors will also keep an eye on economic data releases and corporate earnings in the weeks ahead, which could provide further clarity on the state of the economy and market trajectory heading into 2024.