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Weekly Market Recap: Fed Rate Cuts, Rising Yields, and Consumer Strength Thumbnail

Weekly Market Recap: Fed Rate Cuts, Rising Yields, and Consumer Strength

Financial Planning Insights Investment Stock Market

Market Overview

U.S. stocks closed the week lower following a highly anticipated Federal Reserve (Fed) rate cut and hawkish guidance. The S&P 500 fell 1.97%, while the Dow Jones Industrial shed 2.23%. The Nasdaq Composite dipped 1.77%, with small caps struggling the most as the Russell 2000 dropped 4.43%. Rising Treasury yields, deteriorating market breadth, and government shutdown concerns added to the pressure.

International markets also declined, led by European equities, which posted their worst week in over three months, and Asian stocks, which faced currency volatility from a stronger U.S. dollar. However, New Zealand stood out with a slight weekly gain.

In commodities, crude oil prices fell 2.51%, while gold and silver declined on dollar strength. Natural gas surged 13.48%, driven by winter demand and supply constraints.

Federal Reserve Insights and Economic Roundup

The Fed delivered a third consecutive rate cut but signaled fewer cuts for 2025, sparking a market sell-off. Treasury yields rose, with the 10-year yield climbing 11 basis points, while the yield curve steepened. Despite cooling inflation—up just 0.1% MoM, the lowest pace since May—the Fed emphasized caution, citing sticky inflation in key sectors.

On the economic front, retail sales rebounded in November, supported by strong auto sales and rising consumer incomes. Disposable income adjusted for inflation rose 0.2%, keeping consumer spending strong as the year closes.

Bottom Line: The Fed remains cautious despite progress on inflation, and strong consumer demand continues to support economic growth.

The Week Ahead

Key economic releases to watch include:

  • Monday: Chicago Fed National Activity Index (Nov), Consumer Confidence (Dec)
  • Tuesday: Building Permits (Nov final), Durable Goods Orders (Nov preliminary), New Home Sales (Nov)
  • Thursday: Initial Jobless Claims (Dec 21), Continuing Claims (Dec 14)
  • Friday: Advance Goods Trade Balance (Nov), Wholesale Inventories (Nov preliminary)