(Bloomberg) — A rally that put the stock market within a striking distance of its all-time highs struggled to gain a whole lot of traction ahead of next week’s Federal Reserve decision. Bitcoin halted its rebound. Bonds fell.
The S&P 500 barely budged. Bets on a Fed reduction remained intact despite a slide in jobless claims — a noisy reading that captured the Thanksgiving period. Meta Platforms Inc. jumped about 3.5% as Bloomberg News reported executives are considering budget cuts for the metaverse group. A gauge of small caps climbed almost 1%.
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Worries that the frenzy around artificial-intelligence has gone too far caused a recent wobble in equities. But the strong outlook for the sector and wagers that policy easing will fuel corporate profits bolstered hopes on further gains.
“The key question hanging over markets is whether a potential Federal Reserve rate cut next week can trigger a so-called Santa rally,” said Fawad Razaqzada at Forex.com. “For now, the S&P 500 forecast remains cautiously constructive, albeit with more hesitancy creeping in.”
The pattern for the first couple of weeks of December could prove far “choppier” than the last part of the month, noted Mark Newton at Fundstrat Global Advisors. With bets on a December rate cut rising to near certainty, he said we’re gradually seeing sectors like industrials, financials and small caps climbing.
The S&P 500 closed near 6,860. The yield on 10-year Treasuries rose four basis points to 4.1%. The dollar fluctuated. Bitcoin dropped below $93,000.
Given the equity market’s snapback from late November, technicals have improved to match some of the bullish seasonality thought possible for this month, Newton added. While trends are bullish, he says technicals support further choppiness until after the Fed decision.
“The market’s ‘risk-on’ light is on, led by expectations for a Fed rate cut next week and a broadening rotation down-cap,” said Craig Johnson at Piper Sandler. “But we still anticipate more ‘backing and filling’ as the major indices approach their year-to-date highs.”
While the S&P 500 has made limited progress so far this week, several previously broken levels have now been reclaimed, reinforcing the impression that the bulls maintain a degree of control, noted Razaqzada.
To Matt Maley at Miller Tabak, while the market has spent the past few days consolidating gains, the set-up is a good one.
“So unless we get a big reversal over the next few trading days, the advantage will definitely be with the bulls,” he said.
Maley notes that one area that could do well if we get a strong year-end rally is the small-cap space.
“A push to a new significant all-time high might finally attract the kind of momentum money that could help this part of the stock market outperform,” he said. “Of course, if the mega-cap tech stocks start to roll over in a big way, all bets will be off.”
At Interactive Brokers, Jose Torres noted that the cyclically oriented Russell 2000 is sustaining its recent momentum and is poised to rally in an environment of looser financial conditions alongside a still solid economy.
While the US tech sector is likely to remain a key driver for the market’s next leg up, its recent underperformance also points to other compelling opportunities across the market, according to Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
“As we expect US equities to rally into 2026, we think under-allocated investors should add exposure,” she said. “Beyond the tech sector, we expect a good performance from the health care, utilities, and banking sectors to broaden the foundation for further gains.”
Hoffmann-Burchardi says the Fed’s easing path is supportive to equities and also creates a positive backdrop for quality bonds.
On the macro front, applications for US unemployment benefits fell last week to the lowest in more than three years, indicating that employers are still largely holding onto workers despite a wave of recent layoffs.
Separate data from Challenger, Gray & Christmas showed announced layoffs at US companies fell last month after surging in October, but were still the highest for any November in three years.
“Overall, the net takeaway from the data served to confirm the crosscurrents evident in the labor landscape,” said Ian Lyngen at BMO Capital Markets.
Policymakers will not yet have the government’s November jobs report in hand for their meeting next week. The report, originally due Dec. 5, was delayed until Dec. 16 as a result of the record-long government shutdown. That release will also include October payrolls figures.
“There remain some negative payroll employment readings. But the US labor market is not collapsing based on timely data and reports that have leading indicator properties,” said Don Rissmiller at Strategas. “We continue to believe the Fed will cut the fed funds rate again by 25 basis points in December.”
While investors are largely betting policymakers will cut rates again, officials have rarely been so divided as many still prefer leaving rates elevated to keep inflation in check.
Before their final policy meeting of the year, Fed officials will get a dated reading on their preferred inflation gauge. On Friday, the September income and spending report — long delayed because of the government shutdown — is due to be released.
The figures will include the personal consumption expenditures price index and a core measure that excludes food and energy. Economists project a third-straight 0.2% increase in the core index. That would keep the year-over-year figure hovering just below 3%, a sign that inflationary pressures are stable, yet sticky.
“We continue to expect two rate cuts by the end of the first quarter of 2026, with Friday’s personal consumption expenditure index likely to show price pressures under control,” said Hoffmann-Burchardi at UBS Global Wealth Management.
Corporate Highlights:
Meta Platforms Inc.’s Mark Zuckerberg is expected to meaningfully cut resources for building the so-called metaverse, an effort that he once framed as the future of the company and the reason for changing its name from Facebook Inc. Meta Platforms risks a temporary European Union ban on the rollout of new policies over how its AI features in WhatsApp, after being hit by the latest probe into Big Tech’s alleged dominance on the continent. Salesforce Inc. gave an outlook for revenue in the current period that topped analysts’ estimates, suggesting the software company is persuading customers to buy its AI tools. Snowflake Inc.’s forecast for sales and profit margin in the current quarter raised concerns the company isn’t yet making enough money from its AI-based tools. Dollar General Corp. raised its full-year outlook, showing how value-focused retailers are winning over consumers hunting for deals. Kroger Co. lowered the top end of its full-year sales forecast, sounding a note of caution that competition is intensifying among food sellers for increasingly discerning consumers. PepsiCo Inc. is nearing a settlement agreement with activist investor Elliott Investment Management, the Wall Street Journal reported Thursday, without providing details. Paramount Skydance Corp. accused Warner Bros. Discovery Inc. of failing to conduct a fair auction, saying the film and TV company isn’t acting in its shareholders’ best interests. Versant Media Group Inc., the company being spun off from Comcast Corp., is making acquisitions to diversify beyond its core business of cable-TV networks. Toronto-Dominion Bank, Bank of Montreal and Canadian Imperial Bank of Commerce all beat estimates on results that included strong performance in their capital-markets businesses, continuing a trend seen across other Canadian lenders and wrapping up a year marked by buoyant markets and more advisory work. Novo Nordisk A/S left open the door for additional work on its pill version of Ozempic for Alzheimer’s disease after a pair of failed trials, saying that patients showed a biological response in a handful of areas despite getting no cognitive improvement. Stellantis NV touted promising signs of a turnaround at its Ram and Jeep brands after adding powerful engines and more options for vehicles without a plug. Volkswagen AG plans to convert its small-scale assembly plant in Dresden into an innovation hub after stopping car output, following through on a pledge to avoid factory closures in Germany. Rio Tinto Group’s new chief executive will focus on cutting costs and selling assets in a bid to turn the world’s second largest miner into a slimmed-down operation centered primarily on iron ore and copper. Some of the main moves in markets:
Stocks
The S&P 500 rose 0.1% as of 4 p.m. New York time The Nasdaq 100 was little changed The Dow Jones Industrial Average was little changed The MSCI World Index rose 0.3% Bloomberg Magnificent 7 Total Return Index rose 0.5% The Russell 2000 Index rose 0.8% Meta rose 3.4% Currencies
The Bloomberg Dollar Spot Index was little changed The euro fell 0.2% to $1.1644 The British pound fell 0.2% to $1.3329 The Japanese yen was little changed at 155.10 per dollar Cryptocurrencies
Bitcoin fell 1.3% to $92,459.23 Ether fell 0.8% to $3,139.48 Bonds
The yield on 10-year Treasuries advanced four basis points to 4.10% Germany’s 10-year yield advanced two basis points to 2.77% Britain’s 10-year yield declined one basis point to 4.43% Commodities
West Texas Intermediate crude rose 1.3% to $59.71 a barrel Spot gold rose 0.2% to $4,210.02 an ounce ©2025 Bloomberg L.P.