Investing.com – Wall Street is expected to trade slightly lower on Monday, starting the final week of the year on a negative note as investors cash in on a generally positive fourth quarter. The Federal Reserve's future moves will be in focus, as Bitcoin retreats further from its all-time highs.
1. Will the Fed cut interest rates next in March?
It cut interest rates by a quarter of a percentage point earlier this month, completing a full percentage point cut since September, but its updated forecast indicated a more cautious stance on monetary easing in 2025.
Most officials now expect just two cuts next year, down from four expected in September. In particular, 15 of 19 Fed officials see a risk that inflation will exceed expectations.
Core PCE inflation, a key Fed measure, is expected to reach 2.5% by early 2025 if recent trends continue, above the central bank's 2% target.
Goldman Sachs recently forecast that the Fed will make its next rate cut by 25 basis points in March 2025, adding, in a note on Friday, that the move is expected to be followed by two additional cuts of the same size in June and September.
However, the company highlights risks from geopolitical developments, especially shifts in US policy, including higher tariffs on China and autos, reduced immigration, and new tax cuts under the incoming Trump administration.
The focus this week will be on the weekly numbers on Thursday and the data a day later, as well as comments from a FOMC member.
2. Futures are trending lower; Take profits before the end of the year
US stock futures fell on Monday, with investors taking profits as a generally positive year came to a close.
By 03:45 EST (08:45 GMT), the contract was down 85 points, or 0.2%, down 11 points, or 0.2%, and down 40 points, or 0.2%.
The major averages are set to close 2024 near record levels, up more than 25% and 14% respectively, and are on track to have their best year since 2021. They have gained more than 31%.
Indices are also heading towards a winning fourth quarter, in the wake of Donald Trump's election victory, with the Nasdaq on pace for its longest streak of quarterly gains since the second quarter of 2021.
Monday's list of economic data includes November as well as December, but activity is likely to be limited as the market closes on Wednesday.
3. Japan's Manufacturing PMI shows improvement
Factory activity in Japan contracted at a slower pace in December, according to a private sector survey on Monday, close to stabilizing after recent declines.
Japan's Jibun Bank's final reading rose to 49.6 in December, just below the 50.0 threshold that separates growth from contraction for the sixth month in a row.
The index was slightly higher than 49.5 in the initial reading and 49.0 in November.
He kept the interest rate steady at 0.25% earlier this month, as Governor Kazuo Ueda sought to examine more data and seek clarity on the incoming US administration's economic policies before committing to raising interest rates again.
However, some BOJ policymakers opined that conditions are in place for an imminent rate hike, and more signs of an economic recovery could keep the chance of a January rate hike alive.
4. Bitcoin has a huge uptrend – Pantera
It fell on Monday amid weak year-end trading volumes, weighed down by a rise in US Treasury yields after the Federal Reserve turned tighter at its latest policy meeting.
The benchmark 10-year U.S. note reached its highest level in more than seven months last week, and the yield hovered near that level on Monday, at 4.625%.
At 03:45 ET, Bitcoin was down 1.6% to $93,817.0, down about 4% for the month after retreating from the record high of $108,379.28 it hit on December 17. They are up nearly 120% so far this year.
However, despite these losses, Dan Moorhead, founder and managing director of hedge fund Pantera Capital, believes that the story of digital assets is just beginning and the number of users will grow a lot.
Bitcoin, the leading cryptocurrency, has been doubling in value every year for 11 years, and Moorhead is confident that Bitcoin's consistent performance and role in the bigger picture of technology and economic change is what is driving it.
Moorhead added that Bitcoin's market value could reach $15 billion by 2028, representing 10,000% growth, with the number of people using the cryptocurrency jumping from the current 300 million to as many as 5 billion in the next 10 years.
5. Oil prices decline during holiday trading
Crude oil prices fell slightly on Monday amid weak holiday-impacted trading at the start of the last week of the year.
By 03:45 EST, US crude futures (WTI) were down 0.4% at $70.34 per barrel, while the contract was down 0.4% at $73.50 per barrel.
Both benchmarks are headed for heavy losses in 2024, with the WTI contract down about 1.5% and Brent crude more than 4% so far, largely due to concerns about slowing demand in China, the world's largest oil importer.
Both OPEC and the International Energy Agency expected demand growth to slow in 2025 due to slowing demand in China, the second largest economy in the world.
Investors are looking to China's factory PMI surveys scheduled for Tuesday, looking for more signs of the strength of the economic recovery, especially after Reuters reported that Chinese authorities approved the issuance of 3 trillion yuan ($411 billion) in special treasury bonds in 2017. 2025 in order to boost economic growth next year.
