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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, US, on Monday, Dec. 9, 2024. (Michael Nagle/Bloomberg via Getty Images).
If they behave, Wall Street investors could be in line for Christmas gift from the Fed.
The Federal Reserve can close out the year with a "Santa Rally" that juices financial markets to close out the year, per Kyle Rodda, a senior financial market analyst for Capital.com. However, Rodda added that a "hawkish cut" from the central bank appeared more likely.
In that scenario, the Fed slashes interest rates while still emphasizing the risk of carefully balancing its responsibility to ensure stable prices and full employment. That sends a signal to investors that it’s treading carefully with an economy still grappling with t…
By
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, US, on Monday, Dec. 9, 2024. (Michael Nagle/Bloomberg via Getty Images).
If they behave, Wall Street investors could be in line for Christmas gift from the Fed.
The Federal Reserve can close out the year with a "Santa Rally" that juices financial markets to close out the year, per Kyle Rodda, a senior financial market analyst for Capital.com. However, Rodda added that a "hawkish cut" from the central bank appeared more likely.
In that scenario, the Fed slashes interest rates while still emphasizing the risk of carefully balancing its responsibility to ensure stable prices and full employment. That sends a signal to investors that it’s treading carefully with an economy still grappling with the fallout from tariffs.
"Like after its last meeting, that could be a source of volatility — and potentially upend the ‘Santa Rally’ even in the event of a rate cut as Wall Street hovers just below record highs," Rodda wrote in a Monday market note.
Financial markets were sliding Monday morning as investors awaited the Fed to make a move later in the week. The Dow Jones Industrial Average dropped 0.2%, or over 200 points, while the S&P500 dropped about 30 points, or 0.4%.
Federal Reserve policymakers will meet on Tuesday and Wednesday to debate a third interest-rate cut in a row with aging federal data on employment and inflation. Despite that, investors and financial analysts are broadly expecting the Fed to slash interest rates by another quarter-point, the third and final such cut this year.
Dissents are expected, since the Federal Open Market Committee is divided between policymakers fretting about a weakening labor market and those who want the Fed to pause its rate-cutting campaign for now. The latter wing believes it’s more important to prevent inflation from getting embedded into the U.S. economy. Caught in the middle is Fed Chair Jerome Powell, now closing out the final months of his tenure, which ends in May 2026.