Wall Street follows European stocks lower as Fed looms

Reuters

Wall Street follows European stocks lower as Fed looms

Dec 17, 2024 at 4:02 pm GMT

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Retail sales: U.S. data solid, China RS disappoints

Stocks ease before Fed meets

Traders eye Fed dot plot

Bitcoin hovers near record highs

Updates to U.S. morning trade

By Stephen Culp

NEW YORK, Dec 17 (Reuters) -U.S. stocks followed their European counterparts lower on Tuesday and crude prices fell as investors parsed economic data and girded themselves for a series of central bank decisions, including an expected rate cut from the Federal Reserve.

Bitcoin forged new record highs and benchmark U.S. Treasury yields steadied ahead of what is expected to be a "hawkish cut" from the U.S. central bank.

"There's profit taking ahead of the Fed meeting," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "Markets have had an extremely strong run and it’s probably gotten a little frothy."

"And with this morning’s strong retail sales report, expectations for further rate cuts have been diminished after tomorrow," Pavlik added.

Aside from the Fed, central banks Japan, Britain, Sweden and Norway are all slated to meet this week. The BOJ, the Bank of England and Norges Bank are expected to stand pat, while the Riksbank is seen cutting rates.

Members of the Federal Open Market Committee are due to convene on Tuesday for their two-day monetary policy meeting, which is widely seen culminating on Wednesday with a 25 basis point cut to the key Fed funds target rate.

Markets will scrutinize the accompanying Summary of Economic Projections (SEP), which is expected to temper Fed policy expectations for the coming year in light of sticky inflation and robust economic data.

"We're getting a cut right now because it's largely been priced in and (the Fed has) been sort of backed into it by their earlier commitments, and by the market," Pavlik said.

"Going forward, they're going to be on a pause until more favorable inflation data comes their way."

"I’d rather have a hawkish cut than no cut."

A better-than-expected retail sales report underscored U.S. economic strength, which contrasted with weak retail sales from China, which raised the specter of softening global demand.

The Dow Jones Industrial Average .DJI fell 239.15 points, or 0.55%, to 43,478.33, the S&P 500 .SPX fell 29.83 points, or 0.49%, to 6,044.23 and the Nasdaq Composite .IXIC fell 115.04 points, or 0.57%, to 20,058.85.

European stocks hit two-week lows, weighed down by energy and healthcare stocks as central bank decisions loomed and downbeat data from China stoked demand concerns.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 4.38 points, or 0.50%, to 863.46.

The STOXX 600 .STOXX index fell 0.3%, while Europe's broad FTSEurofirst 300 index .FTEU3 fell 5.61 points, or 0.27%.

Emerging market stocks .MSCIEF fell 10.11 points, or 0.92%, to 1,093.10.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed lower by 0.62%, to 579.69, while Japan's Nikkei .N225 fell 92.81 points, or 0.24%, to 39,364.68.

Yields on 10-year Treasuries backed away from three-week highs ahead of the Fed's rate decision and economic projections.

The yield on benchmark U.S. 10-year notes US10YT=RR fell 1.2 basis points to 4.387%, from 4.399% late on Monday.

The 30-year bond US30YT=RR yield fell 2.6 basis points to 4.5837% from 4.61% late on Monday.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.8 basis points to 4.241% from 4.249% late on Monday.

The dollar steadied against a basket of world currencies as investors digested the likelihood that the Fed will lower its policy rate at a more gradual pace in the coming year.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.11% to 106.91, with the euro EUR= down 0.12% at $1.0497.

Against the Japanese yen JPY=, the dollar weakened 0.4% to

153.54.

Bitcoin hit yet another record high in advance of what many expect to be a "hawkish cut" from the Fed, as cryptocurrencies continue to coast on the prospect of a strategic bitcoin reserve proposed by U.S. President-elect Donald Trump.

Bitcoin BTC= gained 0.46% to $106,575.00. Ethereum ETH= declined 2.3% to $3,955.00.

Oil prices retreated amid renewed demand worries in the wake of economic retail sales data from China.

U.S. crude CLc1 fell 1.95% to $69.33 a barrel and Brent LCOc1 slid to $72.58 per barrel, down 1.8% on the day.

Gold retreated as investors lowered their expectations for the pace and extent of interest rate cuts in the coming year in view of strong economic data and stubbornly high inflation.

Spot gold XAU= fell 0.57% to $2,637.31 an ounce. U.S. gold futures GCc1 fell 0.48% to $2,638.80 an ounce.

World FX rates YTD http://tmsnrt.rs/2egbfVh

Asian stock markets https://tmsnrt.rs/2zpUAr4

European shares mostly lower https://reut.rs/4gBSAOf

World stock indexes YTD https://reut.rs/3OZZXDe

Reporting by Stephen Culp; Additional reporting by Samuel Indyk in London and Ankur Banerjee in Singapore; Editing by Jan Harvey

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