US stock indexes are drifting ahead of a meeting by the Federal Reserve later this week that could set Wall Street’s direction into next year.
The S&P 500 rose 0.3 per cent in midday trading, coming off its first losing week in the last four. The Dow Jones was edging up by 3 points, or less than 0.1 per cent, while the Nasdaq composite rose 0.8 per cent. The Australian sharemarket is set to rise, with futures at 4.51am AEDT pointing to a rise of 8 points, or 0.1 per cent, at the open. The ASX lost 0.6 per cent on Monday.
Wall Street has made a dour start to the week. Credit: Bloomberg
MicroStrategy climbed 4.6 per cent as it continues to benefit from the surging price for bitcoin, which set another record. The software company has been building its hoard of the cryptocurrency, and its stock price has more than sextupled this year. It will soon join the Nasdaq 100 index.
Bitcoin topped $US107,000, according to CoinDesk. It’s catapulted from roughly $US44,000 at the start of the year, riding a recent wave of enthusiasm that President-elect Donald Trump will create a system that’s more favourable to digital currencies.
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The market’s main event, though, will arrive on Wednesday when the Federal Reserve will announce its last move on interest rates for the year. The widespread expectation is that it will cut its main rate for a third straight time, as it tries to give a boost to the slowing job market after getting inflation nearly all the way down to its target of 2 per cent.
The question is how much more it will cut rates next year, and Fed officials will release projections for where they see the federal funds rate ending 2025, along with other economic indicators, once their meeting concludes. Fed Chair Jerome Powell will also answer questions in a press conference following the meeting.
For now, the general expectation among traders is that the Fed may cut two more times in 2025, according to data from CME Group. But that number has been shrinking following reports suggesting inflation may be tougher to get all the way down to 2 per cent from here. Besides last month’s slight acceleration in inflation, another worry is that Trump’s preferences for tariffs and other policies could lead to higher inflation down the line.
Expectations for a series of cuts to rates by the Fed have been one of the main reasons the S&P 500 has set an all-time high 57 times so far this year and is heading for one of its best years of the millennium. The economy has held up better than many feared, continuing to grow even after the Fed hiked the federal funds rate to a two-decade high in hopes of grinding down on inflation, which topped 9 per cent two summers ago.
