SPX: Fed will decide on SPX next move

The inflation data, as posted through the PCE Price Index on Friday, was in the focus of markets during the previous week. This data came just a week before the FOMC meeting, scheduled for December 10th, increasing odds that Fed might cut interest rates by another 25 basis points. The PCE of 2,8% y/y in September was just a bit lower from anticipated 2,9%. In addition, Friday brought University of Michigan Consumer Sentiment for December, exposing decreased inflator expectations for both near and long term. The CME FedWatch Tool is now posting around 87% odds for a 25bps rate cut in December. On the other hand, analysts are noting that the market has already priced this cut, so the main current question is what is next for the US economy?

The S&P 500 continued its winning streak during the previous week. The index has closed the week at the level of 6.870, after previously reaching the weekly high at 6.893. The biggest weekly surprise came from Netflix, who agreed to buy Warner Bros.’ key studio and streaming assets, including HBO/HBO Max and major film-/TV-studio operations, in a deal valued at around $83 billion (equity value about $72 billion). The deal must clear regulatory review, and sources say the Trump administration views the merger “with heavy scepticism,” signalling a potentially difficult approval process under U.S. antitrust scrutiny.

Tech companies continue to dominate markets, however, Nvidia continues to struggle to gain momentum. The week ahead is promising to be a volatile one, considering the FOMC meeting, scheduled for Wednesday, December 10th. As analysts are noting, the market has already priced the 25bps rate cut. In case of any surprises on this side, a significant market correction might be triggered. In case of a rate cut, the markets might continue to price US equities at higher grounds.