Investing.com — Wall Street is seen trading slightly lower on Tuesday ahead of the start of the last Federal Reserve policy meeting of the year. Nvidia stock has entered correction territory, but Germany’s DAX may suffer due to the dissolution of the country’s government.
1. The Fed heads toward lower rates, but what will happen in January?
The last policy meeting of the year began late Tuesday and is expected to end on Wednesday with a widely expected 25 basis point rate cut.
This rate cut, the third in a row, is already fully priced in, and the biggest focus is on how policymakers view further rate cuts in 2025.
Goldman says the unemployment rate is now lower than the FOMC’s expectations and inflation is higher than expected, and expects the central bank to hold out for a rate cut in January, contrary to earlier expectations.
However, Standard Chartered (OTC:) expects the Fed to cut rates further in January as the labor market continues to weaken.
“Our baseline forecast is for another rate cut on January 29, as we expect future labor market data to soften further,” the bank said in a recent note.
“An increase in the unemployment rate or nonfarm payrolls below 125,000 would be enough (for the Fed to cut interest rates in January),” he added.
2. Futures prices fall. Retail sell-by date
U.S. stock futures fell on Tuesday following a recent period of cautious trading ahead of the start of the year’s final Federal Reserve meeting.
By 04:05 ET (09:05 GMT), the contract was down 120 points, or 0.3%, down 17 points, or 0.3%, and down 57 points, or 0.3%.
Wall Street’s main indexes traded mixed on Monday, rising 1.2% to around 0.4%, while blue-chip stocks fell for the first eight straight days since June 2018.
Economic data has been released mainly for November, and it is expected that the economy will grow by 0.6% on a monthly basis as consumer spending continues.
3. Nvidia enters the fix field
Nvidia (NASDAQ:) has been a hot stock on the market this year, with investors linking the chipmaker to the frenzy surrounding artificial intelligence that has made it the world’s largest company.
However, unable to shake off its recent slump, the company’s stock fell into correction territory on Monday, down 11% from its closing high.
This current weakness stems from concerns that the company could become a punching bag given the increasing technology competition between the US and China.
Restrictions imposed by the U.S. government prevent the company from selling its cutting-edge chips to Chinese companies, limiting its ability to advance AI technology.
As both governments seek influence over dominant players in the AI chip market, China responded last week by opening an investigation into Nvidia for possible antitrust violations.
Nvidia has made several efforts to design AI chips that comply with U.S. export rules while providing Chinese customers with the tools to develop key technologies.
The company was forced to deny reports last week that it would cut supplies to China, saying that China is an important market and that it would continue to provide high-quality products and services to Chinese customers.
4. Will political instability in Germany weigh on DAX?
The German government was formally dissolved on Monday after Chancellor Olaf Scholz was rejected in a vote of confidence, paving the way for early elections on February 23.
Scholz’s three-party coalition collapsed last month when the pro-market Free Democrats resigned over debt issues, and his Social Democrats and Green Party lost their parliamentary majority.
The political turmoil comes amid economic instability as Germany’s economy, the eurozone’s largest, struggles to avoid recession and a trade war with Donald Trump’s new administration looms.
Business activity in Germany has contracted for the sixth consecutive month this month, according to data released on Monday, but an Ifo Institute poll shows German companies are pessimistic about the new year and expect business conditions to improve in 2025. Only 12.6% expected that.
But Germany is up more than 20% so far in 2024, significantly outpacing France, as the eurozone’s second-largest economy also struggles with political uncertainty.
“While German stocks have managed to weather slowing growth and political uncertainty this year, French stocks have not,” said Hubert de Barochez, senior economist at Capital Economics. “The impact of the trade war remains strong, so I suspect all companies will be in a slump next year.”
5. Oil traders are waiting for instructions from the Fed.
Oil prices fell on Tuesday, weighed down by profit-taking ahead of the U.S. Federal Reserve’s latest policy meeting.
By 4:05 ET, U.S. crude oil futures (WTI) were down 1.5% at $69.64 per barrel and the contract was down 0.8% at $73.31 per barrel.
Oil prices have fallen from multi-week highs seen last week, as weak economic data from China on Monday prompted investors to take profits as they feared for the health of the world’s second-largest economy. are.
Traders have also been reluctant to hold significant positions ahead of this potentially market-moving event, shifting into holding patterns ahead of the Fed meeting.
The Fed is widely expected to cut interest rates by a quarter of a percentage point, which could boost economic growth and oil demand.
