Schwab Market Update

Published as of: December 18, 2024, 8:58 a.m. ET

(Wednesday market open) Coming off a session in which the three major U.S. stock indexes declined, traders will focus their attention today on the outcome of the year's final Federal Reserve meeting, with another reduction in interest rates almost uniformly expected.

This afternoon, the Federal Open Market Committee, the Fed's policymaking group, is expected to cut the fed funds target rate by 25 basis points, to a range of 4.25%–4.5%. Assuming that does in fact occur, it will be the third reduction of 2024 and take the Fed's cumulative easing to 100 basis points this year. Since investors already are planning for a reduction today, the markets will be paying close attention to both the Fed's comments on the economy and the press conference featuring Fed Chair Jerome Powell after the rate announcement. An updated Summary of Economic Projections, or dot plot, also will accompany the Fed's decision.

Early signs in the futures market pointed toward gains for stocks. On Tuesday, the S&P 500 (SPX), the Nasdaq Composite ($COMP), and the Dow Jones Industrial Average ($DJI) all declined. For the Dow, it recorded its ninth straight decline, something it hadn't done since the late 1970s. Other than the FOMC meeting, the economic calendar featured data on housing starts and building permits prior to the open. Housing starts for November were 1.29 million, weaker than the 1.35 million consensus estimate, though building permits, at 1.51 million, exceeded expectations of 1.43 million.

1. The Dow revisits the disco days: It's just like 1978. Clearly, that might be an exaggeration, but that year was the last time the Dow Jones Industrial Average had nine drops in a row. The index, which some investors use as a barometer for the overall stock market itself, while others prefer measures such as the S&P, has been drifting lower since it last finished a session with a gain, on December 4. That date also marked its first and only close above 45,000. It's been all downhill ever since—but how downhill, really? Despite the multiday drop, the Dow 30 index lost a total of 3.5% in that span. In the same period, the Nasdaq has risen 1.8%, while the S&P has edged down 0.6%. So for the Dow, yes, it can be said that it's been one decline after another. But the overall loss arguably has been on the lighter side considering the number of down days.
2. Retail sales gains show consumer spending power: November retail sales were released this week, and the data from the Census Bureau showed that sales were up 0.7% from October. A gain of 0.5% had been anticipated. Meanwhile, October retail sales were revised higher, to 0.5% from 0.4% previously. Considering the time of year—that is, the heart of the holiday shopping season—it might be easy to learn of a stronger-than-expected retail sales report and draw conclusions about consumer spending. However, it should be noted that vehicle and auto parts sales were a key contributor. And those are in fact retail items, but sizable ones at times, in price as well as dimensions. Perhaps the report does bode well for chain stores, consumers in general, and of course gift recipients. But regardless, the December report, which will arrive after the holidays, is the one that should offer a better perspective on just how much cheer has been going around.
3. Preparing for policy changes: With a new administration poised to begin in Washington just over a month from today, investors continue to think ahead for the potential impacts of key policy changes that will be under consideration. President-elect Trump has offered no shortage of ideas he wants to see implemented during his second time in the White House, including changes to tariffs, immigration, and taxes. A recent WashingtonWise podcast addresses some of these issues and discusses what investors might expect. Not every policy change necessarily will impact the world of finance, but a number of them likely will. And with Republicans about to have the majority in both the Senate and House, markets will be watching closely for any developments.

• General Mills (GIS) was among the notable decliners in premarket trading, losing 4%. The pullback came after the maker of cereals and other packaged foods provided an updated outlook that included a lowered fiscal 2025 forecast for certain key financial projections.
• Nvidia (NVDA) shares were on the upswing in early trading, adding 2.8%. The chip stock has been under pressure lately, losing roughly 10% since its closing high for the month at $145.14 on December 4 through the close December 17. If the stock is able to close the day with gains, it would end a streak of four consecutive losses.
• Micron (MU) was adding 1.6% prior to the open as traders geared up for the chip company's quarterly results, which are expected after the close of the regular U.S. session. Analysts are looking for earnings of $1.76 a share when the results are issued. So far this year, Micron shares are up 27.3%.

Previewing U.S. and global investments: As 2025 gets ever closer, investors may be wondering what to expect from U.S. stocks and global markets in the year ahead. For insight on what might be in store in the new year, listen to 2025 Market Outlook: U.S. Stocks & Economy & Global Markets, a podcast segment featuring Schwab's Chief Investment Strategist Liz Ann Sonders, Chief Fixed Income Strategist Kathy Jones, and others.

The Cboe VIX Index, a volatility index represented in the chart above, has been making its way higher in recent days. This could signal increased demand from investors for downside protection or a more cautious near-term tone from the market. On Tuesday the VIX climbed 8.03% to 15.87.

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

December 18: November housing starts, November building permits, FOMC rate decision, and expected earnings from General Mills (GIS), Lennar (LEN), and Micron (MU).
December 19: Q3 GDP—third estimate, November existing home sales, November leading indicators, and expected earnings from CarMax (KMX), Conagra (CAG), Darden Restaurants (DRI), FedEx (FDX), and Nike (NKE). 
December 20: November personal spending, November personal income, November Personal Consumption Expenditure (PCE) prices, December final University of Michigan Consumer Sentiment, and expected earnings from Carnival (CCL).
December 23: Conference Board Consumer Confidence.
December 24: November durable goods orders and November new home sales.