As the U.S. stock market enters the year-end trading phase, the performance on Monday was mixed. The Dow Jones Industrial Average slightly declined, while the Nasdaq Composite and the S&P 500 Index both reached record highs. Investors are focused on imminent key economic data and the Federal Reserve's monetary policy direction.
The Dow fell by 128.65 points, or 0.29%, to close at 44,782.00 points; the Nasdaq rose by 185.78 points, or 0.97%, to 19,403.95 points; and the S&P 500 increased by 14.77 points, or 0.24%, closing at 6,047.15 points. During Monday's trading, the Nasdaq at one point rose to 19,436.92 points, and the S&P 500 touched 6,053.58 points, both setting intraday historical records.
As the year-end approaches, the market's focus shifts to November's economic data, particularly the upcoming non-farm employment data. Investors are eager to understand the health of the job market to predict whether the Federal Reserve will further cut interest rates in December. U.S. stocks had a strong performance in November, especially after Trump was elected president, driving positive sentiment in the market. The Dow and the S&P 500 rose by 7.5% and 5.7%, respectively, marking the biggest monthly gains since 2024, while the Nasdaq rose by 6.2%.
Small-cap stocks also performed well in November, with the Russell 2000 Index rising by more than 10%, marking the largest monthly increase this year, partly due to investor expectations that the Trump administration might push for tax cuts, benefiting small businesses.
With strong stock performance, analysts expect further room for U.S. stocks to rise. December is usually the most stable month for the S&P 500 index, with lower volatility. Coupled with the bullish sentiment from this year's election, market optimism prevails.
U.S. Treasury yields slightly rose on Monday, as investors closely watch upcoming economic data to predict the Federal Reserve's policy direction. Trump's policy stance might exert upward pressure on the dollar. Nevertheless, analysts believe the stock market fundamentals remain strong.
The Federal Reserve's policy remains a focal point for the market. Fed Chair Powell is scheduled to speak on Wednesday, and the market hopes to gain more clues about future monetary policy. Additionally, the non-farm employment report released on Friday might determine whether the Fed will further cut rates at its December 18 meeting. Currently, the market estimates a 66% probability of a 25 basis point rate cut by the Fed in December.
Federal Reserve Governor Waller stated in a speech on Monday that, barring significant surprises in economic data, he is inclined to support a December rate cut by the Fed. He believes the current policy rate is sufficiently restrictive, and even a rate cut would leave room for future policy adjustments.
Waller noted, "If data shows the forecast for slowing inflation is inaccurate, I will support maintaining rates in December." He emphasized that inflation is expected to continue moving towards the 2% target in the medium term.
Overall, U.S. stock performance and market sentiment are influenced by policy expectations following Trump's election and the Federal Reserve's monetary policy. The impending economic data will determine the future actions of both the market and the Federal Reserve.
