Closing Recap 

U.S. stocks finished mixed on Thursday after another choppy session as investors consolidated positions ahead of next week’s crucial FOMC policy meeting. The small-cap Russell 2000 was the standout performer, gaining nearly 1%, while the Dow and S&P 500 were little changed and the Nasdaq finished slightly higher. The market’s focus remains squarely on the Federal Reserve, with the probability of a December interest rate cut holding steady at a lofty 87%. 

The U.S. dollar rebounded from a five-week low, snapping a nine-day losing streak, while Treasury yields also ticked higher. This put some pressure on foreign currencies, with the euro snapping its eight-day winning streak. In commodities, gold continued its impressive run, settling at a new high above $4,240, while crude oil also found a bid. 

Key Takeaways 

• Choppy, Mixed Session for Stocks: Major indices were mixed in a low-volume session as traders squared up positions ahead of next week’s FOMC meeting. 
• Small Caps Continue to Outperform: The Russell 2000 gained 0.76%, continuing its strong run as falling yields and rising rate cut bets provide a powerful tailwind for the interest-rate sensitive index. 
• Dollar Snaps 9-Day Losing Streak: The U.S. Dollar Index rebounded from a five-week low, though the broader trend remains bearish as the market prices in a dovish Fed pivot. 
• Yen Surges as BoJ Hike Bets Solidify: The Japanese yen was the top-performing G10 currency, with USD/JPY breaking below 155.00 after a Bloomberg report suggested the Bank of Japan is now likely to hike rates in December. 
• Gold Hits New High, Oil Rallies: Gold gained for a third straight day, settling at $4,243 an ounce. Crude oil also rose, with WTI settling near $59.70 as dovish Fed bets supported demand. 
• Bitcoin Remains Fragile: Bitcoin is staging a modest rebound but sentiment remains extremely fragile after a 36% correction from its all-time high.
• Jobless Claims Fall to 2-Year Low: Weekly Jobless Claims unexpectedly fell to 191,000, their lowest level since September 2022, painting a picture of a still-resilient labor market despite other softening indicators. 
• PCE Inflation Data Looms: The market is now looking ahead to tomorrow’s delayed September PCE inflation report, a key data point for the Federal Reserve. 

Market Overview

Wall Street continued its pattern of rotational and choppy trading on Thursday, with the major averages finishing mixed as the market enters a holding pattern ahead of next week’s monumental FOMC policy meeting. After a powerful multi-day rally, the market took a breather on Thursday, with the major indices trading in a tight, choppy range. The session was a classic case of consolidation as investors digest the recent dovish repricing of Federal Reserve expectations and look ahead to next week’s pivotal FOMC meeting. While the headline indices were muted, the outperformance of small caps and other interest-rate sensitive sectors continues to be a key theme, highlighting the market’s conviction in a forthcoming Fed pivot. The data picture remains cloudy, with today’s surprisingly strong Jobless Claims report contrasting with other recent soft labor market indicators. 

Index	Up/Down	%	Last
DJ Industrials	-31.74	-0.0007	47851
S&P 500	7.22	0.0011	6856
Nasdaq	51.04	0.0022	23505
Russell 2000	19.03	0.0076	2531

This data inconsistency is a direct result of the government shutdown and is making it difficult for investors to get a clear read on the economy’s health. For now, the market is choosing to focus on the dovish narrative, with the odds of a December rate cut holding firm at 87%. However, a major risk is brewing in Japan. A Bloomberg report on Thursday suggested that the Bank of Japan is now leaning towards a rate hike in December, a move that would have significant implications for global liquidity and could trigger a sharp and disorderly unwind of the yen carry trade.

Economic Calendar 

With the U.S. government back online, the market is beginning to receive the backlog of delayed economic data. Today’s focus is on the delayed September PCE inflation report. Data Released Yesterday / Overnight: 

• U.S. Weekly Jobless Claims: Unexpectedly fell to 191,000, their lowest level since September 2022, a sign of ongoing resilience in the labor market. 
• U.S. Factory Orders (Sep): Grew a weaker-than-expected +0.2% m/m. 
• Japanese Household Spending (Oct): A huge miss, with spending plummeting -3.0% y/y versus a +1.0% forecast, complicating the BoJ’s policy outlook. 

Today’s Economic Calendar: 

• European Session: An extremely light calendar with only low-tier data releases. 
• U.S. Session: The main highlight is the delayed U.S. September PCE Price Index. This is the Fed’s preferred inflation gauge and will be closely watched, though its age may limit its market impact. 
• The final University of Michigan Consumer Sentiment survey is also due. 
• Canadian Employment Report (Nov): A top-tier release for the Canadian dollar. 

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

Gold prices continued their ascent, with February futures settling up 0.25% at $4,243 an ounce. The metal is being fueled by the sharp drop in the U.S. dollar and Treasury yields over the past week. Crude oil also found a bid, with WTI rallying over 1.2% to settle near $59.70 a barrel, supported by the broad improvement in risk sentiment and dovish Fed bets. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	0.72	0.0122	59.67
Gold	10.5	0.0025	4243
EUR/USD	-0.0019	-0.0016	1.1652
USD/JPY	-0.26	-0.0017	154.97
Bitcoin	1,000+	1.1%+	92000
10-Year Note Yield	0.049	0.0121	0.04107

The U.S. dollar rebounded after a long losing streak, while the yen was the star performer as BoJ hike bets intensified. 

• USD/JPY: The yen is poised to appreciate further, with the pair breaking below the key 155.00 level. A Bloomberg report suggesting a December BoJ rate hike is likely has dramatically shifted sentiment in favor of the Japanese currency,a view supported by hawkish commentary from Governor Ueda. The pair is now at a critical inflection point, with a massive $1.9B options expiry at the 155.00 level acting as a powerful magnet.
• EUR/USD: The pair is taking a breather near 1.1660 after an eight-day winning streak. The euro’s rally has been driven by broad dollar weakness, but a modest rebound in the greenback is now capping the upside. Danske Bank has a long-term bullish target of 1.22. A notable $877M options expiry at the 1.1600 level provides a key support level below the current price.
• GBP/USD: The pound is trading on a flat note near 1.3330. While dovish Fed expectations are supportive, the market is also pricing in a high probability of a December rate cut from the Bank of England, which is likely to limit the cable’s gains. 

Cryptocurrencies: After a period of extreme volatility, the crypto market is showing signs of stabilizing. Bitcoin rebounded to trade above the $92,000 level, though the market remains fragile. JPMorgan analysts noted that while bitcoin’s price could be driven by its correlation to gold, a key risk factor remains the potential for forced selling by major holders like MicroStrategy. Silver continues its incredible run, now up over 100% year-to-date, significantly outpacing gold. U.S. Treasury yields rose, snapping a three-day decline, as investors took profits on their bond positions ahead of next week’s Fed meeting. The benchmark 10-year yield climbed 5 basis points to around 4.11%.

Looking Ahead 

Today’s trading will be dominated by the release of the delayed September PCE inflation report and the November Canadian jobs data. While the PCE data is stale, it is still the Fed’s preferred inflation measure and a significant surprise could still move markets. With the market heavily skewed towards a dovish outcome from next week’s FOMC meeting, the risk of a hawkish surprise and a sharp reversal is elevated. Traders will also be watching for any further developments out of Japan, as the prospect of a BoJ rate hike remains a major wild card for global markets.

What to Watch

• The BoJ’s Hawkish Pivot: The reports signaling a December BoJ rate hike are a potential game-changer. If confirmed, it could trigger a massive and violent unwind of the popular Yen-funded carry trades, a major risk for global markets. 
• PCE as the Final Fed Hurdle: Today’s PCE report is the last major data point before the Fed’s December meeting. A hot number could challenge the market’s aggressive 87% pricing for a rate cut and spark significant volatility. A soft number would give the doves the final green light. 
• The December Seasonality Trade: The market has now entered a period with strong historical tendencies. The seasonal weakness in the U.S. Dollar and strength in the Euro are currently aligning with the fundamental narrative and should not be ignored. 
• The Battle at USD/JPY 155: This is the most critical level in FX right now. The combination of a massive options expiry and the rising threat of intervention makes it a major battleground. A decisive daily break and close lower would be a significant bearish technical signal.