The S&P 500 index fell by 2%, the NASDAQ 100 by 2.3%, and the DJ by 2.3%. The main drivers were the results of the Fed meeting and economic data.
What drives the market
The Fed presented the results of the meeting. The regulator cut the key rate by 0.25 percentage points, as expected. Now the Fed Funds Rate is 4.25–4.5%. The Federal Open Market Committee worsened the rate forecast. The FOMC median forecast assumes 3.9% by the end of 2025, a decrease to 3.4% and to 3.1% in the next two years. The September estimate assumed 3.4%, 2.9% and 2.9%.
Jerome Powell is optimistic about the prospects for US economic growth. The head of the Fed noted that the downward and upward risks for inflation are generally balanced. Powell expects another good year for the US economy.
The macroeconomic data released this week did not make much of an impression. Retail sales in November rose by 0.7% (MoM; forecast: 0.6%). Excluding cars, the indicator added 0.2% (MoM; forecast: 0.4%). Industrial production fell from 0.1% (MoM; forecast: 0.3%).
The number of new buildings decreased by 1.8%, which is worse than expected. The number of building permits increased by 6.1%, which is better than expected. Existing home sales increased by 4.8%, which is better than expected.
According to the third estimate, US GDP grew by 3.1% in Q3, a revision from 2.8% (QoQ; forecast: 2.8%). The forecast of the Atlanta Fed GDPNow service suggests an increase of 3.1% in Q4.
The University of Michigan Consumer Confidence Index rose from 71.8 to 74 (forecast: 74). The current conditions indicator has grown noticeably, while the expectations indicator has decreased. Inflation expectations for the year are 2.8%, for 5 years – 3% per annum.
This time, a Santa Claus rally in the American stock market is quite possible. Based on statistics and target benchmarks, the S&P 500 growth may be about 1%. If we abstract from the index chart, then this is a rather conditional average historical value.
