The Fed's Last Meeting of the Year Begins
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Welcome to the Schwab Market Update podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead. I'm Keith Lansford, and here's Schwab's early look at the markets for Tuesday, December 17th. The last Federal Reserve meeting of the year begins today, but investors will have to wait one more day before they learn the details of policymakers' decision on rates.

Wall Street is expecting a quarter-point reduction in the Fed funds' target rate this week, although market participants undoubtedly will be eager to gather more information about the Fed's views on the economy, which will heavily influence the market's opinion about the future direction of rates. On Monday, the session that began the last full trading week of the year, major U.S. stock indexes were mixed.

The S&P 500 added 22.99 points or 0.38% to 6,074.08. The Dow Jones Industrial Average fell again, this time by 110.58 points or 0.25% to 43,717.48. And the Nasdaq Composite was the leader of the three, rising 247.17 points or 1.24% to

$20,173.89. Despite the fact that the calendar year is winding down, investors still have a wealth of information on the economy to digest this week. Though Monday was quiet on the data front in the U.S., later this morning, reports are expected on retail sales, capacity utilization, and industrial production.

Retail sales for November being released by the Census Bureau are expected to be up 0.5% compared with October. Separately, capacity utilization for November is forecast at 77.3%, up from 77.1% the previous month. Industrial production, meanwhile, is expected to be up 0.3% compared with a 0.3% decline in October. Both capacity utilization and industrial production are released by the Federal Reserve.

Additional data, including readings on housing and personal consumption expenditure prices, highlight the calendar later in the week. A few earnings reports that could impact the market are also expected.

But it's the Federal Open Market Committee, the Fed's policymaking arm, that remains the headline. According to the CME FedWatch tool Monday, the market is placing 95.4% odds on a 25 basis point cut at the conclusion of the FOMC meeting Wednesday afternoon. Assuming the Fed's action matches those expectations, it would be the third rate reduction of 2024, all of which have occurred in the second half of the year.

In the prior two cuts, the Fed Fund's target rate was reduced by a total of 75 basis points, first by a half a point in September and then by another quarter point in early November. After this week, the next FOMC meeting doesn't take place until late January. For now, market watchers generally aren't expecting another reduction at that meeting, with the CME FedWatch tool showing a 79.9% chance that rates will hold steady.

That said, much can change in the next few weeks, and the Fed will have ample information to consider as they ponder the health of the economy, particularly the U.S. employment situation and inflation rate. This has been the Schwab Market Update podcast.

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