- The FOMC is expected to cut rates on Wednesday.
- Bitcoin Mining stocks were up big on Monday.
- Micron and Nike report earnings this week
Stocks were up on Monday, led by a surge among Bitcoin mining stocks.
In the last full week before the Christmas holiday, there is a lot of hustle and bustle on the markets. The headline event this week is the Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday, where the committee is expected to lower the federal funds rate for the third straight meeting.
But there are also some key earnings reports on tap this week.
Investors were in good spirits on Monday, anticipating perhaps a gift from the FOMC on Wednesday. As of 2:00 p.m. ET on Monday, the Nasdaq was up 240 points or 1.2%, while the S&P 500 gained 30 points or 0.5%. The Russell 2000 was up 20 points or 1% while the Dow Jones Industrial Average dropped 32 points or 0.1%.
Fed Expected to Lower Rates
The FOMC is widely expected to lower the federal funds rate when it meets this week. The CME FedWatch gauge overwhelmingly anticipates the Fed to lower rates for the third straight meeting when it announces its rate decision on Wednesday at 2:00 p.m. ET.
CME FedWatch, which polls interest rate traders, says 99.1% of those surveyed expect a 25-basis point cut on Wednesday to the 4.25% to 4.50% range. The other 0.9% say the Fed will hold the line at the current 4.50% to 4.75% range.
This comes at a time when inflation has ticked up the past two months, after falling down to 2.4% in September. The Consumer Price Index (CPI) is now up to 2.7%. However, the good news is that core inflation, which excludes more volatile food and energy prices, has plateaued at 3.3% since September.
The FOMC will also be releasing its summary or projections, or dot plot, on Wednesday, That should provide insights into what the committee expects going forward on the economy, inflation, and the trajectory of rates.
In Monday commentary, Dr. David Kelly, chief global strategist at J.P. Morgan Asset Management, anticipates the Fed will signal a shallower path for rate cuts in the years ahead.
“The reasons for this will be recent data showing more resilient economic growth and stickier inflation, frothier equity markets and the potential for the policies of the new administration to add to inflation pressures. The Fed will also likely be concerned that if they cut too much and ought to reverse course, they could be bullied into too easy a policy by the incoming administration or, at an extreme, see their independence threatened,” Kelly said Monday on his Notes on the Week Ahead podcast.
Bitcoin Mining Stocks Up Big; Micron, Nike Report Earnings
The markets were being led on Monday by several Bitcoin mining stocks, which have benefitted from the recent surge in the price of Bitcoin to over $100,000 per Bitcoin.
Among the top gainers on Monday were Cipher Mining (NASDAQ:CIFR) up 21%, Terawulf (NASDAQ:WULF) up 18%, Bitdeer Technologies (NASDAQ:BTDR) up 12%, Riot Platforms (NASDAQ:RIOT) up 11%, Hut 8 (NASDAQ:HUT) up 10%, and MARA Holdings (NASDAQ:MARA) up 8%.
There are also a few big bellwether names reporting earnings this week, including semiconductor firm Micron Technology (NASDAQ:MU).
Micron, which makes memory and storage chips, is seeing high demand for its AI chips. Analysts anticipate earnings of $1.77 per share and revenue of $8.7 billion, which would be an 84% year-over-year increase. Micron stock is up 28% YTD.
The other notable name to report this week is Nike (NYSE:NKE), which releases earnings on Thursday. Nike has been one of the worst performers on the Dow Jones Industrial Average this year, down 28% YTD. Analysts don’t expect much from Nike, anticipating earnings of 64 cents per share, which would be down 38% year-over-year. Revenue is projected to be $12.2 billion, down 9%.
Nike is in a period of transition with a new CEO and likely a change in direction, so it will be interesting to hear where the shoe and apparel retailer is headed.