Nasdaq Hits Record High as Wall Street Prepares for Federal Reserve Meeting

NEW YORK — U.S. stock indexes showed a mix of trading moves on Monday, as investors await an important Federal Reserve meeting scheduled for this week. This meeting could shape the direction of Wall Street for the upcoming year.

The S&P 500 index increased by 0.4%, bouncing back after facing its first losing week in the past month. Meanwhile, the Nasdaq composite surged by 1.2%, reaching an all-time record. In contrast, the Dow Jones Industrial Average struggled, declining by 110 points, equivalent to a 0.3% drop.

One of the notable performers in the S&P 500 was Broadcom, whose shares jumped by 11.2%. This rise came after the company reported profits that exceeded analysts' expectations last week. Investors are particularly excited about Broadcom's developments in artificial intelligence, which seem to be driving much of the enthusiasm.

The most significant event for the market will be the Federal Reserve's announcement on interest rates scheduled for Wednesday. Economists largely predict that the Fed will implement its third consecutive rate cut this year in an effort to stimulate a slowing job market. This action follows a successful reduction of inflation towards its 2% target.

Traders are curious about how much more the Fed will cut rates next year. During the meeting, Fed officials will provide updated projections for the federal funds rate, extending to 2025, along with other important economic indicators. Fed Chair Jerome Powell will hold a press conference afterward to address any questions.

Currently, the general consensus among traders suggests that the Fed may consider a couple of additional rate cuts in 2025, according to data from CME Group. However, expectations for these cuts have diminished recently due to reports indicating that achieving the 2% inflation target might be more challenging. Concerns also include potential policy changes by President-elect Donald Trump, which may lead to increased inflation in the future.

For instance, economist David Mericle from Goldman Sachs has revised his earlier forecast, now predicting that the Fed may not cut rates in January. He emphasized that the Fed might be hesitant to continue cutting rates aggressively due to uncertainty about how low rates actually need to go to avoid negatively impacting the economy.

The anticipation of further rate cuts has played a significant role in driving the S&P 500 to hit all-time highs 57 times this year, marking one of the strongest years in the past two decades. The economy has surprisingly continued to grow, even as the Fed raised interest rates to a two-decade high to combat inflation that reached over 9% two summers ago.

On Wall Street, MicroStrategy saw its stock rise as much as 7% during the day, benefiting from the soaring price of bitcoin, which achieved another record high. However, the stock ended the session slightly down by less than 0.1% as bitcoin's price dipped below $106,000 after briefly exceeding $107,700, according to data from CoinDesk.

This software firm has been actively accumulating bitcoin, leading to its stock price increasing more than sixfold this year. It is also set to join the Nasdaq 100 index soon.

Bitcoin's price trajectory has jumped from approximately $44,000 at the beginning of the year, fueled by speculation that Trump might create a more favorable environment for digital currencies.

Furthermore, Honeywell shares increased by 3.7% after the company mentioned that it is still considering a spin-off or potential sale of its aerospace unit, as part of a broader review of its business strategy. An update on this matter is expected with their fourth-quarter earnings release.

However, the overall market was tempered by a decline in Nvidia stock, which fell 1.7%. As one of the giants in the AI chip market, Nvidia carries a significant weight in the S&P 500, making its performance critical.

To summarize, the S&P 500 gained 22.99 points, closing at 6,074.08. In contrast, the Dow Jones Industrial Average decreased by 110.58 points to close at 43,717.48, while the Nasdaq composite climbed by 247.17 points, reaching 20,173.89.

In the bond market, Treasury yields remained relatively stable, with the yield on the 10-year Treasury falling slightly to 4.39% from 4.40% late Friday. The two-year yield, which aligns closely with Fed rate expectations, eased to 4.24% from 4.25%.

Looking beyond U.S. borders, stock markets in Europe and Asia experienced modest declines. In Hong Kong, indexes fell by 0.9%, while Shanghai saw a decrease of 0.2%. Market participants reacted to lackluster economic indicators from China, despite ongoing efforts to bolster the world’s second-largest economy.

South Korea’s Kospi index also dropped by 0.2%, amid political turmoil where law enforcement is seeking to question impeached President Yoon Suk Yeol regarding his short-lived martial law decree. The Constitutional Court is deliberating on whether to remove him or reinstate him.

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