Stocks Waver, Yields Advance in Countdown to Fed: Markets Wrap

(Bloomberg) — Stocks are marking a second day of muted trading as traders wait to hear the Federal Reserve’s views on interest rates for 2026 after an expected cut at Wednesday’s policy meeting. Treasuries extended their slide.

S&P 500 futures were little changed. A rally in US stocks has stalled this week after traders pulled big bets off the table, with mixed economic signals and divisions among Fed policymakers clouding the outlook for rates. Microsoft Corp. dropped 1.6% in premarket trading, while Nasdaq 100 contracts fell 0.2%.

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Treasury yields continued their advance. The 10-year rate rose as much as two basis points to 4.21%, the highest since the first week of September. Globally, a view that rate-cutting cycles are nearing their end has driven yields on a Bloomberg gauge of long-dated government debt to a 16-year high.

In the US, recent economic data have shown that the economy is cooling in a manner consistent with what the Fed wants, but not weak enough to accelerate rate cuts, wrote Linh Tran, market analyst at XS.com. Inflation is easing but still above target, while the labor market continues to show some resilience.

“This combination provides little incentive for investors to continue buying at elevated valuations, yet does not offer sufficient reason for them to sell aggressively,” Tran said. “What the market needs at this moment is a clearer policy signal from the Fed.”

Traders are anticipating a third straight rate cut at Wednesday’s meeting, with attention centered on the latest dot plot, economic projections and comments from Chair Jerome Powell. Money markets are pricing about two quarter-point cuts for 2026.

Most analysts expect policymakers to repeat that downside risks to employment “rose in recent months” and that “inflation remains somewhat elevated.” Some also expect the statement to indicate less certainty about the chances of additional rate adjustments in the coming months.

“Cut, but make it hawkish,” said Stephan Kemper, chief investment strategist at BNP Paribas Wealth Management. “Expect a rate cut paired with a ‘long hold’ message — via the statement, dots and Powell — that keeps the door to easing open without promising it.”

Investors will also be watching Oracle Corp.’s post-market results as questions mount over technology valuations and whether heavy investment in artificial intelligence will ultimately pay off. With its shares down 33% since a high in September, the company has emerged as a barometer for AI risk due to a massive spending spree and weaker credit grades.

The combination of the Fed meeting and Oracle has the potential to break the cautious calm of recent days as traders recalibrate their exposure. From there, the first US payrolls report in months is shaping up to be the next catalyst that will steer direction.

“I’m waiting for a hawkish easing,” said Mary-Sol Michel, a director as Swiss Life Private Banking in Paris. “Powell cannot afford not to put some kind of caveat on that cut. I’m therefore expecting some volatility after the rate decision and until we get further US job data on Dec. 16.”

Florent Pochon, the head of cross-asset strategy at Natixis, sees three cuts next year on the back of unemployment spiking in the first quarter.

“I think the risk for the market is probably a bearish reaction to some kind of hawkish cut from the Fed,” Pochon said. “It could be a good point to buy the dip in the short part of the curve.”

In commodities, silver extended its rally after breaking above $60 an ounce for the first time on Tuesday, with momentum coming from supply tightness and bets on further monetary easing by the Fed. The white metal rose as much as 1.6% to a record $61.6145 an ounce.

Corporate News:

Chinese artificial intelligence startup DeepSeek has relied on Nvidia Corp. chips that are banned in the country to develop an upcoming AI model, according to a new report in The Information. SpaceX is moving ahead with plans for an initial public offering that would seek to raise significantly more than $30 billion, people familiar with the matter said, in a transaction that would make it the biggest listing of all time. China Vanke Co. rallied in the equity and credit markets Wednesday after a bondholder meeting included discussion of sweetened terms among plans for a closely watched effort by the distressed builder to delay a note payment. US manufacturer GE Vernova Inc. jumped 8% in premarket trading after boosting its buyback and doubling a dividend. Amazon.com Inc. pledged to invest $35 billion in India over the next five years, boosting its spending in the key growth market to expand in businesses from quick commerce to cloud computing. Coupang Chief Executive Officer Park Dae-jun resigned over his failure to prevent South Korea’s largest-ever data breach. Aegon Ltd.’s shares dropped after it unveiled disappointing payouts, overshadowing a confirmation it will move its headquarters to the US. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 7:59 a.m. New York time Nasdaq 100 futures fell 0.2% Futures on the Dow Jones Industrial Average were little changed The Stoxx Europe 600 fell 0.1% The MSCI World Index was little changed Currencies

The Bloomberg Dollar Spot Index was little changed The euro rose 0.1% to $1.1639 The British pound rose 0.1% to $1.3314 The Japanese yen rose 0.1% to 156.72 per dollar Cryptocurrencies

Bitcoin fell 0.7% to $92,009.01 Ether rose 0.7% to $3,325.31 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.20% Germany’s 10-year yield advanced two basis points to 2.87% Britain’s 10-year yield advanced two basis points to 4.53% Commodities

West Texas Intermediate crude rose 0.6% to $58.61 a barrel Spot gold fell 0.3% to $4,196.27 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Neil Campling, James Hirai, Julien Ponthus, Levin Stamm and Kwaku Gyasi.

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