Markets on edge ahead of Fed rate decision

US equity markets were broadly flat on Tuesday as investors awaited the outcome of the Federal Reserve’s final policy meeting of the year. The Dow slipped modestly, the S&P 500 finished essentially unchanged, and the Nasdaq edged slightly higher. Sector performance was mixed, with basic materials and consumer defensive equities leading, while industrials, real estate, and healthcare lagged. US Treasury yields moved higher across the curve, reflecting uncertainty around the policy path, with the 10-year yield closing near 4.19%. Market expectations continue to point to a 25-basis-point cut at today’s meeting, though analysts anticipate the possibility of dissent within the FOMC as policymakers update their economic projections and debate the appropriate pace of easing.

Economic data added further nuance to the outlook. Job openings for October exceeded expectations, holding steady near 7.7 million and signalling resilient labour demand despite a drop in the hiring rate. At the same time, small-business sentiment improved: the NFIB Small Business Index rose to 99, slightly above its long-term average, while plans to increase employment climbed to their highest level since late 2024. These indicators suggest underlying stability in the labour market even as overall job growth moderates. In corporate news, Nvidia shares dipped slightly after President Trump confirmed that exports of certain AI chips to China would be permitted, though more advanced technology remains restricted. Overall, the combination of steady economic readings and a cautious policy backdrop kept equities trading in a narrow range ahead of the Fed’s announcement.

Latest market and economic update

• Asian equities slipped as investors awaited the Fed’s rate decision, with Chinese markets weakest on renewed deflation concerns and a China-Japan diplomatic row. Japan eased on sticky inflation, while broader regional markets were subdued. India’s Nifty 50 edged higher after recent declines driven by IndiGo’s slump amid an operational crisis.

• Wall Street futures were largely flat overnight ahead of today’s Fed meeting, with S&P 500 futures at 6,847.50, Dow futures at 47,600, and Nasdaq 100 futures down 0.1%. Markets awaited a widely expected 25-basis-point rate cut, while Nvidia’s China chip approval provided limited support. Key earnings from Oracle, Broadcom, Adobe, and Costco will guide AI and tech sentiment.

• European shares closed largely flat Tuesday, with the STOXX 50 down 0.1%, as investors awaited the Fed’s likely 25 bp rate cut. EssilorLuxottica fell 5.7% on smartglasses competition, Thyssenkrupp dropped 7% after a 2026 loss warning, while defence stocks surged on Germany’s €52 billion procurement plans, led by Hensoldt (+6.5%) and Rheinmetall (+4.1%).

• The US dollar was largely steady earlier Wednesday, trading at 1.1632 against the euro, as markets anticipated a Fed rate cut while remaining cautious over a potentially hawkish tone from Chair Powell. The USD showed little overall movement, reflecting uncertainty about the Fed’s 2026 policy path and broader market sentiment.

• Oil prices were steady in Asian trade, supported by a sharp 4.8-million-barrel U.S. inventory draw and expectations of a Fed rate cut that could lift demand. Brent hovered near $62 and WTI around $58, though both remain down about 3% over two sessions. Ukraine peace talks and record U.S. output forecasts added mixed signals.

• President Trump is set to begin final interviews for the next Federal Reserve Chair, including Kevin Warsh and NEC director Kevin Hassett, though meetings may be postponed. Markets favour Hassett, who noted yesterday there is “plenty of room” for rate cuts but rising inflation could make them inappropriate, highlighting a potentially transformative economic period akin to the 1990s.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

• Nvidia has developed optional location verification software to track AI chip usage, addressing U.S. export concerns, even as China may restrict its H200 chips, requiring buyers to justify purchases. Despite U.S. approval and a 25% fee, domestic preference for local technology and the H200’s inferiority to newer models could limit Chinese demand.

• Microsoft and Amazon have announced substantial investments in India, with Microsoft committing $17.5 billion to expand AI and cloud infrastructure, including a new data centre, while Amazon plans over $35 billion by 2030 to boost AI, exports, and create one million jobs. These initiatives highlight the strategic importance of India for U.S. tech giants’ digital and AI ambitions.

• Google’s Gemini chatbot is gaining against OpenAI’s ChatGPT, with downloads and website visits surging and monthly users rising 30% to 346 million. ChatGPT remains ahead with 810 million users and higher engagement, but Gemini’s rapid growth and Google’s broader AI reach, including search and voice, are intensifying competitive pressure.

• JPMorgan expects 2026 expenses to reach $105 billion, driven by growth, volume-related costs, and strategic investments, particularly in consumer and community banking, exceeding analyst estimates of $100.84 billion. Shares fell 4.7%, its largest one-day drop since April. Investment banking revenue is expected to rise modestly, with markets revenue up in the low teens.

• SpaceX is planning an IPO in mid-2026, aiming to raise over $25 billion with a valuation above $1 trillion, sources told Reuters. Funds would support space-based data centres and Starlink operations. The company expects $15 billion revenue in 2025, rising to $22–24 billion in 2026, mainly from Starlink, while Musk dismissed recent secondary sale reports.

• GE Vernova shares rose over 5% after-hours as the company doubled its quarterly dividend to $0.50 and upgraded its multi-year financial outlook. Revenue is now projected at $52 billion with a 20% adjusted EBITDA margin by 2028, alongside $22 billion in cumulative free cash flow. Share repurchases were raised to $10 billion, supported by a growing backlog and strong contract wins.

• Northland Capital Markets sees the AI infrastructure boom continuing through 2026, driven by hyperscaler demand and edge AI growth. Constraints in electricity, capital, and geopolitics may slow the market from 2027, causing a multi-year pause before a “J-shaped recovery.” Major cloud-linked companies are best positioned; edge AI offers early-stage opportunities.

• Spotify is launching music videos for premium subscribers in the U.S. and Canada, following a beta in nearly 100 markets, to compete with YouTube and enhance engagement. Early data shows videos boost streams and shares. The move complements recent subscription price hikes, strong Wrapped engagement, and CEO Daniel Ek’s upcoming shift to executive chairman.

• TotalEnergies will acquire a 40% stake in Galp Energia’s Namibian license, including the Mopane discovery, collaborating to drill three wells over two years. TotalEnergies will cover half of Galp’s exploration costs, recouped from future cash flows. Galp also takes a 10% stake in TotalEnergies’ Venus license, expanding both companies’ presence in Namibia.

• Home Depot forecast fiscal 2026 comparable sales and EPS below analyst estimates, citing cooling demand for DIY and big-ticket projects amid high borrowing costs and housing market challenges. Same-store sales are expected flat to 2%, EPS flat to 4%. CFO McPhail anticipates the company will outperform the broader market as housing pressures ease.

• Exxon Mobil targets $25 billion earnings growth and $35 billion cash flow increase by 2030, raising oil and gas output, especially in Guyana and the Permian Basin. Upstream production will hit 5.5 million boepd, aided by AI-driven efficiency and cost cuts. CFO Kathy Mikells will retire, succeeded by Neil Hansen, as Exxon maintains $28–33 billion annual spending.

• CVS Health expects 2026 profits to exceed Wall Street estimates, driven by improved margins at Aetna and Caremark. Despite revenue slightly below forecasts, the company plans to enhance consumer experiences via a new app and market exits. CEO Joyner’s turnaround strategy, including cost cuts and management strengthening, has lifted shares over 70% this year.

• BMW named 30-year veteran Milan Nedeljkovic, 56, as CEO from May 14, succeeding Oliver Zipse. Nedeljkovic, a key architect of the Neue Klasse EV platform, will focus on sales growth, particularly in China, and advancing autonomous driving. Zipse, who led BMW through crises and EV strategy, will retire after 35 years.

• Citi raised Apple’s price target to $330, citing strong iPhone 17 demand and a healthy upgrade cycle from 2020–21 models. Tight supply and early iPhone 18 timing support growth, alongside the shift to WMCM packaging in 2026. Services remain resilient, with EPS estimates of $8.30 (FY26) to $10.13 (FY28) underpinning the higher valuation.

• Bank of America named Ferrovial its Top Pick for 2026, citing strong pricing power in North American toll roads and a robust long-term earnings outlook. Canadian 407 ETR tariff hikes and U.S. managed lanes drive projected EBITDA growth, while new greenfield projects and the New Terminal One airport concession offer further upside, supporting a €67 price target.

• Citi upgraded German defence supplier Renk Group to Buy, maintaining a €65 price target, citing the shares’ 25% undervaluation and rising European defence spending. The upgrade reflects valuation rather than fundamentals, with expected total returns of 26.3%. Land systems, EU and NATO commitments, and a five-year 17% profit CAGR support the outlook.

• Goldman Sachs revised cruise sector ratings, citing Caribbean oversupply. Viking Holdings was upgraded to Buy for its geographic diversification and pricing power, with a price target of $78. Norwegian Cruise Line was cut to Neutral due to heavy Caribbean exposure and softer yields, prompting lowered 2026–2027 earnings estimates amid heightened downside risk.

Upcoming data and events

Today’s main economic focus is the Federal Reserve’s interest rate decision, FOMC statement, and economic projections, with markets closely watching Chair Powell’s press conference for guidance on monetary policy. The EIA crude oil inventories report will also be released. Key earnings include Oracle, Adobe, Synopsys, Chewy, and Vail Resorts, offering insights into tech, retail, and leisure sectors.