Wall Street Puts Big Bets on Hold in Fed Countdown: Markets Wrap

(Bloomberg) — Stocks wavered and US Treasury yields pared back from a nearly two-month high as traders held off on making big bets ahead of the Federal Reserve’s final interest-rate decision of 2025.

S&P 500 was litte changed after the benchmark halted a four-day rally. The rate on 10-year Treasuries fell two basis points to 4.15% after rising to the highest level since late September. The dollar steadied while Bitcoin fell more than 1%.

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A dayslong slump in US government bonds has curbed risk appetite as traders grow cautious about the pace of monetary easing beyond Wednesday’s meeting. Money markets now barely see two cuts in 2026 after a likely 25-basis-point reduction tomorrow — a retreat from more optimistic forecasts in recent weeks.

Tom Essaye pointed to the risk of a hawkish cut, where the Fed lowers interest rates but signals it’s done with rate cuts for the moment.

“It’s not too much of an exaggeration to say that the rate cut is actually the least important part of this meeting,” said the founder of The Sevens Report. The market “cares much more that the Fed signals it will continue to cut rates and does not signal a pause in the rate-cut cycle.”

For now, the Fed’s decision and its guidance for 2026 remain the key focus for markets. US stocks may turn more volatile after tomorrow’s meeting than after other recent decisions, with Bloomberg options data showing an implied move of 0.7% in either direction.

“Given all the tension in global bond markets at the moment, the meeting of the Fed could potentially add fuel to the fire,” said Vincent Juvyns, chief investment strategist at ING in Brussels. “Investors will also be watching very closely the results of Oracle and Broadcom. There’s a lot at stake this week.”

Data due later Tuesday, including the Job Openings and Labor Turnover Survey, will round out economic releases before the Fed announcement. The JOLTS report is expected to show that the labor market softened modestly in September and October, according to Bloomberg Economics.

Globally, bond markets have been under pressure as central bankers signal that their easing cycles are coming to an end. On Tuesday, Australia’s Michele Bullock declared her country’s easing phase over, following comments from the European Central Bank’s Isabel Schnabel that she’s comfortable with the next move being higher. The Bank of Japan is expected to hike next week.

While the Fed’s easing cycle is currently intact, investors must still contend with a policy committee that has grown fractious, limited economic data after the government shutdown and uncertainty over the stance of Chair Jerome Powell’s successor when his term ends in May.

“A more politicized Fed would likely push front-end yields lower via more aggressive rate-cut expectations,” noted Filip Andersson of Danske Bank A/S. “Higher long-term inflation expectations could lift the inflation risk premium, supporting long-end yields and adding steepening pressure.”

What Bloomberg strategists say…

“While pretty much everyone and their dog expects the Fed to cut rates on Wednesday and to signal some modest additional easing next year, there seems to be a growing realization that US policy expectations are looking out of sync with the rest of the world.

As such, the expectation that tomorrow will see a ‘hawkish cut’ and divides on the committee seems pretty accurate. It does, of course, widen the window for a dovish surprise.”

— Cameron Crise, Macro Strategist, Markets Live. For the full analysis, click here.

Corporate News:

Microsoft Corp. pledged to invest $17.5 billion on artificial intelligence and cloud computing in India, targeting the world’s most populous nation to help fuel its growth. Home Depot Inc. is offering cautious preliminary guidance for next year, a sign that the home-improvement retailer doesn’t anticipate the housing market to rebound in the short term. Google has been hit by a European Union investigation over fears it may have abused its dominance by using its own artificial intelligence tools to squeeze out competition. PepsiCo Inc. reached an agreement with activist investor Elliott Investment Management that includes a 20% reduction in its US product lineup and a sharper focus on affordability, while the soda and snacks company also plans layoffs as part of cost reduction efforts. Trafigura Group reported a “strong” year for both its oil and metals divisions as the commodities trading giant boosted payouts to staff and profit remained resilient. A Bloomberg basket of European defense stocks rose as German lawmakers prepare to approve a record €52 billion ($61 billion) in military procurement contracts. China Vanke Co.’s offshore creditors have started fielding requests for talks with potential advisors, a sign that investors are preparing for a worsening of the developer’s debt crisis. Some of the main moves in markets:

Stocks

The S&P 500 was little changed as of 9:30 a.m. New York time The Nasdaq 100 fell 0.2% The Dow Jones Industrial Average rose 0.1% The Stoxx Europe 600 was little changed The MSCI World Index was little changed Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1633 The British pound was little changed at $1.3314 The Japanese yen fell 0.3% to 156.44 per dollar Cryptocurrencies

Bitcoin fell 1.3% to $90,124.45 Ether fell 1.3% to $3,107.54 Bonds

The yield on 10-year Treasuries declined two basis points to 4.15% Germany’s 10-year yield declined one basis point to 2.85% Britain’s 10-year yield declined three basis points to 4.49% Commodities

West Texas Intermediate crude fell 0.3% to $58.72 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.

–With assistance from Neil Campling and Julien Ponthus.

©2025 Bloomberg L.P.