The three major indices on the New York Stock Exchange opened slightly lower on December 9 (local time). Investors are taking a wait-and-see approach ahead of the U.S. Federal Reserve's decision on the benchmark interest rate, which is now just one day away. There is also growing caution that risk appetite could weaken if the Fed signals a cautious approach to slowing the pace of monetary easing.
As of 9:59 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average was up 148.17 points (0.31%) from the previous trading day, standing at 47,887.49. The S&P 500 Index, which focuses on large-cap stocks, rose 9.39 points (0.14%) to 6,855.9, while the tech-heavy Nasdaq Index was down 32.901 points (0.14%) at 23,513.003.
Starting today, the Fed is holding its final Federal Open Market Committee (FOMC) meeting of the year over two days. The market widely expects the Fed to cut the benchmark rate by 0.25 percentage points for a third consecutive time, following the cuts in September and October, adjusting the rate from the current 3.75-4.0% per annum to 3.5-3.75%. According to the CME FedWatch tool, as of today, the interest rate futures market is pricing in an 89.4% probability of a 0.25 percentage point cut at this meeting, while the probability of the rate being held steady is 10.6%.
The market's focus is on the Fed's guidance regarding the future path of interest rates. While U.S. employment is slowing, inflation remains above the Fed's 2% target, leading to diverging opinions within the FOMC on whether to cut rates further or keep them unchanged. Even if a rate cut is implemented, key points to watch include whether there is consensus among committee members and the degree of hawkishness (preference for monetary tightening) reflected in the dot plot for next year's rate outlook. The press conference by Federal Reserve Chair Jerome Powell, which will be held immediately after the rate decision, is also drawing significant market attention.
Tom Essaye, founder of The Sevens Report, said, "It is no exaggeration to say that the rate cut itself is not the most important aspect of this meeting. The market is much more focused on whether the Fed will signal a continuation of rate cuts or indicate a pause in the rate-cutting cycle."
On Wall Street, there are forecasts that the FOMC outcome could increase volatility in both the stock and Treasury markets.
Vincent Juvyns, Chief Investment Strategist at ING, stated, "Given the current tension in the global bond markets, this Fed meeting could potentially add fuel to the fire. Investors will also be closely watching the earnings results of Oracle and Broadcom. There is a lot at stake this week."
Oracle is scheduled to release its earnings on December 11, and Broadcom on December 12.
U.S. Treasury yields are also slightly lower. The yield on the 10-year U.S. Treasury, the global benchmark for bond yields, fell by 2 basis points (1 bp = 0.01 percentage point) from the previous session to 4.15%, while the yield on the 2-year U.S. Treasury, which is sensitive to monetary policy, rose by 1 basis point to 3.56%.
By stock, Nvidia is down 0.45%. Although the Donald Trump administration has approved the export of Nvidia's advanced artificial intelligence (AI) chip "H200" to China, selling pressure is evident. Broadcom is down 0.31%, while Microsoft is up 0.16%.
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