Closing Recap 

U.S. stocks finished lower on Monday, snapping a four-day winning streak for the S&P 500 as investors took a cautious stance ahead of the week’s main event: the Federal Reserve’s final monetary policy decision of the year on Wednesday. Trading volumes were light as the market consolidated recent strong gains. The U.S. dollar firmed and Treasury yields climbed, partly in response to a powerful earthquake in Japan that weakened the yen. This caution comes even as the Fed’s multi-year quantitative tightening program officially concludes, marking a major monetary policy shift. In commodities, crude oil and gold both slipped. The crypto market remained on edge, with Bitcoin managing to hold the key $90,000 level.

Key Takeaways 

• Stocks Snap 4-Day Winning Streak: Major indices fell in a low-volume session as investors took profits and adopted a wait-and-see approach ahead of Wednesday’s FOMC decision. 
• December Fed Cut Now a Near Certainty: The market is firmly convinced of a Federal Reserve rate cut this week, with the odds holding steady at a lofty 90%, driven by signs of a cooling U.S. labor market and a more dovish tone from some Fed officials.
• Fed’s Quantitative Tightening (QT) Officially Ends: The Fed’s balance sheet fell to its lowest level since April 2020 as the QT program concluded on December 1st. This marks the end of a major tightening chapter and shifts all focus to the future path of interest rates. 
• FOMC Guidance is Key, Goldman Sees January Cut Option Open: While a December rate cut is expected, guidance is paramount. Goldman Sachs anticipates the Fed will avoid committing to a pause, keeping a January rate cut on the table amid labor market uncertainty. 
• Yen Weakens After Quake, but Intervention Threats Escalate: The Japanese yen fell after a 7.6-magnitude earthquake, but Prime Minister Takaichi issued fresh warnings about taking “appropriate actions” against yen weakness, raising the stakes for currency traders. 
• Dollar Firms as Yen Weakens, Gold Slips: The U.S. Dollar is firming, supported by a sharp rise in Treasury yields and a weakening Japanese Yen, which was hit by a major earthquake overnight. Gold is pulling back as the dollar’s strength and profit-taking weigh on the precious metal.
• Oil and Bitcoin Weaken: WTI Crude Oil and Bitcoin are both trading with a negative bias as the market’s risk appetite wanes ahead of the slew of central bank meetings.
• Focus Shifts to Delayed U.S. Data: The market is now bracing for a flood of delayed U.S. economic data, including today’s JOLTS Job Openings report, which will be the first of several key labor market indicators this week.
• Tech is Lone Bright Spot Amid Growing Debate: The technology sector was the only S&P 500 sector to finish in the green, even as influential strategists like Yardeni Research turn cautious on the “Magnificent Seven,” contrasting with bullish 2026 calls from Morgan Stanley. 
• Dollar and Yields Rise: The U.S. dollar and Treasury yields both climbed as investors braced for a potentially “hawkish cut” from the Fed, where the central bank could signal a higher bar for future easing. 

Market Overview

Wall Street started the new week with a quiet and mixed session, snapping a four-day winning streak for the S&P 500. After a powerful four-day rally, the market took a well-deserved breather on Monday. The session was a classic case of consolidation ahead of a major risk event, with investors reluctant to place big bets before hearing from the Federal Reserve on Wednesday. As the market looks ahead, it does so against a backdrop of a significant monetary policy shift. The Federal Reserve’s quantitative tightening (QT) program officially concluded on December 1st, having reduced the central bank’s assets by $2.43 trillion and unwound over half of its pandemic-era expansion. With this chapter of tightening now closed, all attention is on the future path of interest rates. While a 25-basis-point rate cut this week is almost fully priced in, the market is bracing for the details of the Fed’s forward guidance. 

Index	Up/Down	%	Last
DJ Industrials	-214	-0.0045	47739
S&P 500	-23.88	-0.0035	6846
Nasdaq	-32.22	-0.0014	23545
Russell 2000	-0.5	-0.0002	2520

According to Goldman Sachs, the Fed will likely want to keep its options open for January, given the continued softening of the labor market and the lack of official data during the shutdown. This creates an environment of uncertainty, pitting the market’s dovish hopes against the Fed’s desire for flexibility. This short-term uncertainty is set against increasingly bullish long-term forecasts from Wall Street. Morgan Stanley’s Michael Wilson is now calling for a bullish 2026, expecting market leadership to broaden to small caps and consumer discretionary stocks, a view that stands in contrast to warnings from others about stretched tech valuations. Despite the bullish case for a “Santa Rally” and a slew of analysts calling for a strong 2026, a sense of caution is palpable.

Economic Calendar 

With the U.S. government back online, the market is beginning to receive the backlog of delayed economic data. Today’s focus will be on the weekly ADP data and the JOLTS job openings report. Data Released Yesterday / Overnight: 

• NY Fed Inflation Expectations (Nov): Households’ year-ahead inflation expectations held steady at 3.2%, while their pessimism about their financial situations grew. 
• RBA Rate Decision: Held the cash rate steady at 3.6% as expected, but the statement introduced a clear hawkish bias, with the board noting that risks to inflation have tilted to the upside and that they considered either a long pause or a hike. 
• German Trade Balance (Oct): Showed a widening surplus as exports rose and imports fell.

Today’s Economic Calendar: 

• European Session: An extremely light calendar with only the German trade balance report released. 
• U.S. Session: The main highlights are the delayed U.S. October JOLTS Job Openings and the weekly ADP jobs data, which will provide fresh insights into the health of the labor market. 
• A heavy slate of central bank speakers from the BoJ, BoE, and RBNZ.

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

The story in commodities has been the pullback in Gold. Gold prices slipped, with February futures settling down -0.59% at $4,217.70 an ounce as a firmer U.S. dollar and rising Treasury yields prompted some profit-taking after last week’s strong rally. Crude oil prices also fell sharply, with WTI dropping 2% to settle at $58.88 a barrel on profit-taking and a slightly less dovish market mood. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-1.2	-0.02	58.88
Gold	-25.3	-0.0059	4217.7
EUR/USD	-0.0007	-0.0006	1.1636
USD/JPY	0.42	0.0027	155.75
Bitcoin	1,000+	1.4%+	90870
10-Year Note Yield	0.035	0.0085	0.04174

The U.S. dollar firmed in choppy trading as investors positioned for the week’s central bank meetings. The Japanese yen weakened after a major earthquake, but underlying hawkish BoJ bets and official warnings are providing a floor. 

• USD/JPY: The pair rallied towards 156.00 after a 7.6-magnitude earthquake hit Japan, weakening the yen. However, the yen’s weakness is drawing increasingly sharp warnings from Tokyo. Prime Minister Sanae Takaichi herself reiterated that the government will take “appropriate actions” on FX if necessary, raising the stakes for traders betting against the currency. 
• EUR/USD: The pair is fluctuating around 1.1650 in a tight range. With a Fed rate cut largely priced in, the euro is finding support, but the technical picture suggests a loss of bullish momentum. A cluster of large options expiries between 1.1500 and 1.1760 defines the broad trading range.
• GBP/USD: The pound is holding steady above the 1.3300 level. Dovish Fed expectations are providing a tailwind, but the market is also pricing in a high probability of a December rate cut from the Bank of England, which is likely to cap the cable’s gains. 
• AUD/USD: The Aussie is the G10 leader, rallying to 0.6640 after the RBA delivered a hawkish hold, with Governor Bullock signaling that rate cuts are not being considered and that hikes could be on the table.

Cryptocurrencies: After a volatile weekend, the crypto market is showing signs of stabilizing. Bitcoin is trading around the $90,800 level, finding some relief from the broader improvement in risk sentiment and dovish Fed bets. U.S. Treasury yields climbed as investors braced for this week’s FOMC meeting. The benchmark 10-year yield rose 4.1 basis points to 4.18%, hitting a 2.5-month high, as the market considers the possibility of a “hawkish cut” from the Fed. 

Looking Ahead 

Today’s trading will be dominated by the release of the U.S. JOLTS and ADP data, which will be the last major labor market indicators before the Fed’s decision tomorrow. Stronger-than-expected data could challenge the market’s dovish conviction and lead to a reversal in the dollar and a pullback in stocks. Conversely, weak numbers would all but guarantee a rate cut and could fuel the next leg higher for the year-end rally. The main event, however, remains Wednesday’s FOMC announcement, which will set the tone for the market heading into 2026.

What to Watch

• The FOMC is Everything: This week’s Fed decision is the main event. While a 25bps cut is fully priced in, the market will hang on every word from Chair Powell’s press conference. His assessment of the economy in the data vacuum and any guidance on the path forward will be critical. 
• The Data Deluge Resumes: The release of the delayed October JOLTS report today will be the market’s first look at official U.S. labor market data in weeks. Expect significant volatility as the market finally gets a clearer picture of the economy. 
• The Hawkish RBA and the Aussie: The RBA’s hawkish pivot is a major new development. Traders will be watching to see if the Australian Dollar can build on its gains and break key resistance levels, or if the rally will fade. 
• The End of QT: The Federal Reserve’s Quantitative Tightening program has officially ended. The Fed’s balance sheet fell by $2.43 trillion, unwinding 51% of its pandemic-era expansion. This is a significant milestone for monetary policy.