Investing.com -- Wall Street is seen trading marginally higher Monday, but ranges are likely to be limited ahead of the final Federal Reserve meeting of the year. Economic data again points to a weak Chinese recovery, while Bitcoin soared to a new record high on talk of a strategic reserve.
1. Fed to cut, but may turn more cautious
The week’s highlight will be the final Federal Reserve meeting of the year on Wednesday, with the US central bank widely expected to deliver another 25-basis point rate cut, in what would be its third straight reduction.
With the cut already fully priced in, investors are focusing on any guidance around how much further rates could be cut in 2025.
The Fed's updated summary of economic projections released at the meeting will provide one indication of where policymakers see rates heading, after the previous summary had pointed to four rate cuts in 2025.
The Fed is likely to signal a slower pace of interest rate cuts in 2025 this week, Goldman Sachs (NYSE:GS) said, and now expects the central bank to stand pat in January against earlier expectations for a cut.
“One reason is that unemployment has undershot and inflation has overshot the FOMC’s projections, though neither surprise is quite as significant as it appears,” Goldman Sachs analysts wrote in a note.
They said that the central bank may also be cautious about new policies under the Donald Trump administration, especially in the face of increased trade tariffs.
Goldman said the central bank is still expected to cut rates in March, June, and September 2025, by 25 bps apiece.
But the central bank’s terminal rate in the current easing cycle is now forecast slightly higher at 3.5% to 3.75%.
2. Futures just higher; MicroStrategy to shine?
US stock futures edged marginally higher Monday, starting the new week on a cautious note ahead of the final Fed meeting of the year.
By 04:00 ET (09:00 GMT), the Dow futures contract was largely flat, S&P 500 futures climbed 2 points, or 0.1%, and Nasdaq 100 futures rose by 17 points, or 0.1%.
The main Wall Street indices come off a sluggish week, with the blue chip Dow Jones Industrial Average losing almost 2%, falling for a seventh consecutive day and marking its longest losing streak since April.
All eyes are on the Federal Reserve this week, with the US central bank widely expected to ease monetary policy again as the year draws to a close.
The economic data slate has preliminary purchasing managers index readings due for release before the bell, while on the corporate side MicroStrategy (NASDAQ:MSTR) is likely to be in the spotlight after it was announced as a new addition to the Nasdaq 100 index.
3. Mixed Chinese economic data; more stimulus ahead?
Economic data released over the weekend illustrated the uneven recovery in China’s economy, pointing to the likelihood of further stimulus measures from Beijing.
Chinese industrial production grew as expected in November as recent stimulus measures from Beijing supported business activity, data showed on Monday.
However, retail sales fell short of forecasts, reflecting ongoing weakness in consumer spending, while house prices continued to fall.
The mixed data underline how challenging it will be for China's leaders to mount a durable economic recovery heading into 2025, with domestic consumption weak and given the possibility of more US trade tariffs under a second Trump administration.
Expectations of more stimulus remain high, but the additional help would likely have to be consumer-focused to have a serious impact.
That said, Moody's (NYSE:MCO) Ratings raised China's 2025 GDP growth forecast to 4.2% from 4.0%, in a report Monday, as it expected credit conditions to stabilise and Beijing's stimulus efforts since September to mitigate some impact from potentially higher US tariffs.
4. Bitcoin surged to new record high
Bitcoin surged to a new record high Monday, boosted by comments from President-elect Donald Trump late last week suggesting the creation of a strategic reserve for the digital currency, similar to the country’s strategic oil reserve.
At 04:00 ET (09:00 GMT), Bitcoin rose almost 2.5% to $104.410, having previously surged to a record high of $106,569.4.
Trump told CNBC in an interview last week that he potentially planned to build a crypto reserve similar to the Strategic Petroleum Reserve, as part of his plans to make the US a global crypto leader.
Sentiment was also boosted by MicroStrategy Incorporated being added to the Nasdaq 100 index - a move that could draw even more capital into the world’s biggest corporate Bitcoin holder.
Bitcoin, the world’s most popular cryptocurrency, has surged more than 50% since the Nov. 5 election that saw Trump elected, resulting in a market cap of $2.11 trillion, according to CoinMarketCap.
With just a 14% increase in price, Bitcoin could become the 6th largest asset globally by market volume, surpassing Google’s market cap of $2.3 trillion, solidifying its place as one of the most valuable financial instruments in the world.
5. Oil retreats ahead of Fed meeting
Crude prices retreated Monday, handing back some of the previous week’s gains after the release of disappointing Chinese economic data and ahead of the latest Federal Reserve policy meeting.
By 04:00 ET, the US crude futures (WTI) dropped 1.5% to $70.28 a barrel, while the Brent contract fell 0.7% to $74.00 a barrel.
Both contracts recorded stellar gains last week, bolstered by new European Union sanctions on Russian oil and expectations of tighter sanctions on Iranian supply.
However, concerns over sluggish demand have limited the gains, particularly from China, the world’s largest crude importer.
Last week, the International Energy Agency noted that China's oil demand has been contracting, further underscoring fears of oversupply in the coming year.
Markets were also cautious before a Fed meeting this week, where the central bank is widely expected to trim rates by 25 basis points but also flag a slower pace of cuts for 2025.