By Stocks were little changed on Tuesday as investors positioned themselves ahead of the Federal Reserve’s final policy decision of the year, keeping major indices largely rangebound.
The S&P 500 hovered around the flatline, while the Dow Jones Industrial Average added 55 points, or 0.2%.
The Nasdaq Composite underperformed, slipping 0.2% as weakness in select technology names weighed on the index.
Traders now turn their attention squarely to Wednesday’s interest rate announcement.
Markets expect the central bank to lower its key overnight lending rate by another 25 basis points, following similar cuts in September and October.
According to CME’s FedWatch tool, fed funds futures imply an 89% probability of a cut, sharply higher than the less than 67% odds priced in about a month ago.
Corporate Movers: CVS Jumps, Tech Loses Steam
Among individual names, CVS was a standout performer, climbing 5% after issuing a stronger-than-expected profit outlook for next year.
The guidance provided one of the day’s clearer catalysts in an otherwise subdued trading session.
Tech stocks, which had dominated Monday’s trading, were more mixed. Semiconductor names led the prior session’s advance, with Broadcom rising nearly 3%, while Nvidia and Microsoft gained about 2% each.
That rally was fueled by a report from The Information indicating that Microsoft is considering designing custom chips with Broadcom.
By contrast, Tuesday saw less decisive momentum across the sector, reflecting an overall wait-and-see posture ahead of the Fed’s decision.
All three major indexes had declined in Monday’s session as the 10-year Treasury yield moved higher, underscoring ongoing concerns about the impact of persistent inflation on financial conditions.
The impact of the Fed decision
The narrative shaping US equity markets has shifted repeatedly throughout 2025.
Early in the year, President Donald Trump’s tariffs emerged as a dominant driver of stock performance, influencing sector rotations and global risk sentiment.
By mid-year, the red-hot AI trade eclipsed most other forces, propelling the S&P 500 more than 20% higher from May through October. Mega-cap technology companies channelled tens of billions of dollars into AI development, causing their valuations — and share prices — to become acutely sensitive to borrowing costs.
Since late October, however, the Federal Reserve has eclipsed both tariffs and AI as the most powerful influence on equity performance.
The equity-market “playbook,” as traders describe it, has been straightforward: dovish signals have lifted stocks, while any hint of hawkishness has triggered selling.
With the Fed beginning its two-day meeting on Tuesday, investors are less focused on whether the December cut materialises — a move widely expected with odds near 87% — and more on the policy trajectory heading into 2025.
What the market is looking for now is clarity on subsequent cuts. Futures imply only a 23% probability of another move in January, and a 37% chance of a second reduction by the March meeting.
Given those muted expectations, traders appear to be hoping for some dovish signals from Chair Jerome Powell that more easing is on the horizon.
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