Fed Day Dawns with Rate Cut, Hawkish Tone Expected

Published as of: December 10, 2025, 9:10 a.m. ET

(Wednesday market open) The Federal Reserve is widely expected to cut rates today for the third straight meeting. Stocks flattened in early trading while the 10-year Treasury note yield posted a three-month high above 4.2%, possibly on concerns that lower rates could ignite more inflation. Questions heading into the decision include how many officials dissent, what the "dot plot" of rate projections shows, and the tone Fed Chairman Jerome Powell takes at the podium.

If Powell puts on his hawkish hat and warns of inflation after the anticipated 25-basis point rate cut at 2 p.m. ET, the market might have an ugly reaction. If Powell sounds dovish and leaves the door open for more cuts, that might support stocks, though reaction from the Treasury market could keep any rallies in check. The long end of the curve, which reflects future inflation and growth expectations, has extended its premium to shorter-term yields more directly connected to Fed policy. "I think the market's more likely to get a hawkish tone out of the Fed than a dovish tone," said Nathan Peterson, director of derivatives research and strategy, Schwab Center for Financial Research (SCFR).

The S&P 500 index barely moved Tuesday and has been rangebound between 6,800 and 6,850 so far this month, trading about 1% below its all-time high. Investors appear to seek direction from the Fed and today's post-close results from Oracle (ORCL). A "Santa Claus rally" can't be ruled out, but isn't a slam dunk, either, considering recent reluctance to test the October peak. "Bullish seasonality and potential performance chasing could be in play, but markets appear to want a strong economy, lower yields across the curve, an accommodative Fed, and a healthy AI secular growth story," Peterson said.

1. Lining up the dots ahead of Fed: With today's rate decision comes the Fed's quarterly dot plot on future rate expectations and its projections for the economy. The median estimate for the September "dot plot" pegged the Fed funds rate at between 3.25% and 3.5% by the end of 2026, slightly below the June projection of 3.5% to 3.75%. "We expect the median estimate in the Dots to stay at 3.375% but there will likely be differing views about the path forward," said Cooper Howard, director of fixed income research and strategy, SCFR. If the Fed doesn't lower its median 2026 rate target, it would imply just one cut next year following the one anticipated today that would take the target range to between 3.5% and 3.75%. That might not satisfy investors, who widely expect at least two cuts and possibly three in 2026, according to the futures market. There could be wide divergence in views within the dot plot, with hawks unwilling to cut further. Investors might want to monitor futures trading right after the decision and during Powell's conference for hints on how participants receive the news.
    
2. Rate path in doubt amid lack of data: The Fed is making its decision with sparse October and November jobs data, though private sector reports displayed continued weakness. Inflation, meanwhile, hasn't moved toward the Fed's 2% goal, meaning policy makers could cut today and warn that the punch bowl might be withdrawn for a while. Odds of a January cut are below 20% in futures trading. Yesterday's job openings data showed improvement, possibly putting the job market on better footing and providing the Fed more ballast to argue against further rate cuts. "The reasoning for a rate cut is the evidence that the labor market is weakening," said Kathy Jones, chief fixed income strategist, SCFR. "While we don't have up-to-date jobs data, the numbers we have suggest that the labor market has stalled with little hiring taking place. Layoffs have started to pick up, although not at recessionary levels. The assumption is that 3% is the 'neutral rate' and therefore, with the fed funds rate still at 3.75% to 4%, there is room to lower rates without boosting inflation. However, there is plenty of disagreement with that outlook within the FOMC."
    
3. More Schwab clients stayed bullish last month: Schwab clients were net buyers of stocks in November for a sixth consecutive month. This was thanks to heavy lifting from a handful of mega-cap stocks as "buy the dip" came into force amid monthly drops for many of the "Magnificent Seven." The Schwab Trading Activity Index (STAX) outpaced the S&P 500 index for the third-straight month. Throughout the month, clients targeted mega caps with big pullbacks. Nvidia (NVDA) led in net buying, followed by Palantir (PLTR), Meta Platforms (META), Amazon (AMZN), and Tesla (TSLA). Stocks that went sideways or were big winners saw the opposite reaction from clients looking to sell into strength and rotate into underperforming names. The stocks with the most net selling were Apple (AAPL), Broadcom (AVGO), Eli Lilly (LLY), Intel (INTC), and Rivian (RIVN). Just two of 11 S&P 500 sectors saw net buying from Schwab clients during November: Information technology and consumer discretionary. The biggest net-sell sectors were communication services, health care, and energy, bucking trends on Wall Street.

GE Vernova (GEV) rose more than 10% in early trading after raising its outlook for revenue by 2028 to $52 billion from $45 billion and doubling its dividend. It also raised its buyback authorization to $10 billion from $6 billion and said it sees this quarter's revenue coming in toward the higher end of expectations. The company received upgrades from Oppenheimer and RBC Capital, and several other firms raised their price targets for the stock.
 

Nvidia (NVDA) and other chip stocks are generally higher this morning, possibly signaling more strength for the tech sector going into key earnings from Oracle today and Broadcom (AVGO) tomorrow.
 

Oracle inched up ahead of this afternoon's earnings. Investors will likely focus on Oracle's heavy AI spending and want an update on remaining performance obligations. This metric, which rose 359% year over year to $455 billion in Oracle's fiscal first quarter, sent shares soaring three months ago. Analysts expect a more than 15% year-over-year quarterly revenue climb, with cloud infrastructure revenue up 70%, Reuters said.
 

JPMorgan Chase (JPM) got a 4% haircut Tuesday after the company said it expects to spend more next year than analysts had expected. The weakness there didn't extend to most of its big bank competitors, however.
 

Adobe (ADBE) fell slightly early today ahead of its earnings this afternoon. Adobe approaches earnings after a strong outing last time that included above-consensus guidance. Back then, Adobe cited powerful demand for its AI-influenced annual recurring revenue. Shares are up recently from November's lows, suggesting market participants hope for a repeat.
 

Microsoft (MSFT) fell 1.6% ahead of the open after the company said it plans to invest $23 billion for global AI expansion, much of it in India. Shares are down more than 10% from the late-October high.
 

Marvell Technology (MRVL) rose 1.8% in pre-market trading, supported by company remarks that, contrary to reports, it hasn't lost any business from major customers, CNBC reported.
 

Cracker Barrel (CBRL) fell 3.4% after reporting lower-than-expected fiscal first quarter revenue, down 5.7% year over year. It also sliced its fiscal 2026 revenue forecast.
 

EchoStar (SATS) rose nearly 6% ahead of the open after an upgrade to Overweight from Equal Weight by Morgan Stanley.
 

Many large consumer-oriented stocks including Tesla (TSLA), airlines, resorts, and auto makers had a solid day Tuesday, possibly taking their cue from the anticipated rate cut.
 

Small caps continue to be buttressed by rate cut hopes. The Russell 2000 (RUT) index rose Tuesday and hit an all-time intraday high.
 

Bitcoin (/BTC) slid 1.3% in early trading but stayed near the high end of its near-term range. Crypto-related stocks generally retreated in pre-market action.

Market breadth, or the percentage of S&P 500 stocks trading above their respective 50-day moving averages ($SPXA50R-candlesticks) has generally been steady over the past week after a nice breadth thrust the last week of November, suggesting more member participation. At 48.6% as of late yesterday, it's slightly above the 50-day average of 47% (blue line). Sector breadth is led by energy, health care, financials, and materials. This is good news for those worried about narrow leadership, but sectors with higher market capitalization like communication services, tech, and discretionary might need to retake the mantel if major indexes are going to make new highs before year-end.

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

December 11: Expected earnings from Broadcom (AVGO), Ciena (CIEN), lululemon (LULU), and Costco (COST).

December 12: No major earnings or data expected.

December 15: No major earnings or data expected.

December 16: November nonfarm payrolls and expected earnings from Lennar (LEN).

December 17: Expected earnings from General Mills (GIS).