US Stocks Mixed As Investors Await Rate Cuts and Trump's Return

US stocks traded in a mixed fashion Monday, with investors focused on future interest-rate cuts at the start of a holiday-shortened week. The New York Stock Exchange is set to close early Tuesday for Christmas Eve, and the market is shut on Christmas Day. The Dow Jones Industrial Average suffered a 10-day losing streak, its longest since 1974, slumping over 1,000 points last Wednesday after the Federal Reserve signaled fewer rate cuts for 2025 than previously projected.

Friday's cooler-than-expected inflation reading helped stocks recoup some of the losses, and trading is likely to be more rangebound during the festive period. Investors should “purchase a neck brace” in January, Yardeni Research said, predicting more market volatility as Donald Trump prepares to retake office. This volatility, driven by potential policy changes under Trump 2.0, could present more buying opportunities. The Personal Consumption Expenditures (PCE) price index—a key inflation gauge favored by the Federal Reserve—rose 0.1% in November, a slower pace from October's 0.2% increase. This brought the annual PCE inflation rate to 2.4%, slightly below estimates of 2.5%. Although the recent data indicated some cooling in inflation, it still remained above the Fed's 2% annual target, indicating that overall inflation still remained sticky. The Fed signaled a cautious approach to monetary policy adjustments, emphasizing the need for continued progress on inflation before considering further rate cuts. Comments from Fed officials on Friday showed that some policymakers were starting to factor in fiscal policy uncertainty, such as tariffs, in their outlooks. Fed officials reiterated that they were still uncertain about how the new Donald Trump administration policies would affect the interest rate outlook, with some saying it was the very same uncertainty that led them to forecast fewer cuts in 2025. The Federal Reserve raised interest rates by 25 basis points on Wednesday but forecast just two rate cuts in 2025, compared with a prior forecast of four cuts

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