Dow Losing Streak at Nine; Fed's FOMC Likely to Cut 0.25% Today; Wall Street Reaction May be Muted

US stocks suffered declines on Tuesday, with the Dow logging its ninth consecutive drop, its biggest losing streak in 46 years.

The last 9-day losing streak for the Dow was in February of 1978. Prior to that, the index suffered an 11-day losing streak in 1974 and another in 1971.

Stock futures are suggesting that the streak may end right at nine. Dow futures are up 125 points a half hour before the opening bell, thouogh they are well off their highs. NASDAQ futures have fallen into the red with S&P futures up marginally.

The day's trading will center around the Fed's FOMC interest rate policy decision at 2:00 pm ET, with Chairman Jerome Powell's press conference and the Fed's economic projections, complete with dot plots showing expectations for federal funds target rate direction through 2025 and beyond.

While the market will try to make sense of the Fed's posture, expectations, and Powell's subtle signals, nothing that happens today, except in the improbable case that the Fed doesn't cut from 4.50-4.75% to 4.25-4.50%, will matter very much in the long term because the incoming Trump administration is likely to tear up the playbook and institute new policies that will change the dynamic of how the government and the Fed handle deficits, government funding, and the direction of the country.

What interested parties will be looking for are signs of whether the Fed plans to continue cutting rates and where they eventually land. Projections so far have the Fed pausing at around 3.25-3.50%, implying four further rate cuts spread across the first two quarters of 2025. There are FOMC meetings set for January 28-29, March 18-19, May 6-7, and June 17-18. Cuts of 25 basis points would align with Trump's forced austerity policies for the government and continue to fuel speculation that the United States will follow Europe into recession early in the coming year.

Notably, the next FOMC meeting will occur after Trump's inauguration. Judging by the speed at which Trump has made his choices to fill key administration positions, he's likely to unleash the DOGE of Vivek Ramaswamy and Elon Musk via executive order on the first day in office via executive order. Presidential observers expect more than just a few executive orders from President Trump in his first few days, shaping his domestic policies with strong leanings towards efficiency and de-regulation.

While Trump's plans should eventually result in renewed growth for the U.S. economy, there's likely to be some disruption at the start. Entire departments could be defunded or downgraded, with budgets trimmed to bare bones and employee layoffs via Reduction in Force, over which federal unions would have no power to protest.

With Trump and his team on a cost-cutting expedition, expect howls from the entrenched congress and their supporters in the federal bureaucracy. The administrative state is not going to submit to its own demise without a fight.

That is why today's events are likely to produce more noise than signal about the future of U.S. markets, policies, and growth potential.

There is a good chance that the Fed won't reveal much today and even if they do, Wall Street insiders may interpret it with an ample supply of skepticism.

Elsewhere, bitcoin has backed off slightly, trending just below $105,000. The slump in gold and silver continues though the Fed's announcement may foster some change there. Oil is higher, though there still doesn't appear to be much conviction in higher prices. The world economy is obviously slowing and oil price is a key indicator.

At the Close, Tuesday, December 17, 2024:
Dow: 43,449.90, -267.58 (-0.61%)
NASDAQ: 20,109.06, -64.83 (-0.32%)
S&P 500: 6,050.61, -23.47 (-0.39%)
NYSE Composite: 19,517.61, -110.07 (-0.56%)