There is an 88% chance that the Fed will cut interest rates by 0.25% on December 10, according to CME FedWatch futures market data, which rarely makes mistakes, but that means the promise of a new round of cheap money won’t be enough to boost U.S. stock futures this morning. S&P 500 futures fell 0.64% premarket; Nasdaq 100 futures fell 0.78%.
Pessimism started in Asia, with Japan’s Nikkei 225 down 1.89% and South Korea’s Kospi down 0.16%. Europe is no better. The Stoxx Europe 600 index fell 0.21% in early trading, and Britain’s FTSE 100 index fell 0.14% before midday.
That was in stark contrast to U.S. trading on Friday, when the S&P closed higher for a fifth straight session. weekend talk This marks the beginning of the “Santa Claus rally,” a good month for stocks in December as traders enjoy the holiday cheer (and the corporate earnings picture becomes clearer in the fourth quarter).
Unfortunately, the tech industry is spoiling the event: Bitcoin fell to $85,000 early this morning before recovering to $86,000 levels. That’s well below the all-time high of $125,000 set earlier this year. “It’s looking a lot like crypto winter,” RBC’s daily morning email said.
More broadly, while the S&P 500 is up 16.5% year to date, “concerns about an AI bubble remain prominent, with the Magnificent 7 Index falling for the first time (in November) since March,” according to a report Deutsche Bank this morning.
These concerns take the form of Morgan Stanley’s argument that hedge funds are Effectively Shorting Oracle’s AI Debt By purchasing credit default swaps (a type of insurance that pays out if a debtor defaults) on its bonds. Traders are increasingly skeptical of this approach AI companies fuel growth through debt rather than income.
There may also be good news for the stock market on the horizon, especially if the Federal Reserve cuts interest rates in December. Traders are now looking to see whether the Fed will cut interest rates again in January, according to an email from ING and Goldman Sachs this morning. Currently, CME FedWatch shows a 21% chance of this happening. “We believe the market will increasingly focus on pricing in subsequent meetings,” George Cole and his colleagues at Goldman Sachs wrote. “We think the pricing in the first quarter is too little.”
Here’s a snapshot of the market ahead of the opening bell in New York this morning:
- S&P 500 Index Futures It was down 0.58% this morning. It closed up 0.54% on the previous trading day.
- Stoxx Europe 600 Index It fell 0.21% in early trading.
- British FTSE 100 It fell 0.14% in early trading.
- Japanese Nikkei 225 Index down 1.89%.
- Chinese CSI 300 up 1.1%.
- South Korea Korea Composite Index down 0.16%.
- Indian nifty 50 down 0.1%.
- Bitcoin It fell to $86,000.