S&P500: US Indices Ease Ahead of Pivotal Fed Announcements on Wednesday

Stocks Slip as Traders Hold Back Before Fed Decision

The S&P 500 edged lower on Monday as traders paused ahead of the Federal Reserve’s final policy meeting of the year. The index slipped 0.35% to 6,846.51, while the Nasdaq Composite eased 0.14% to 23,545.90. The Dow Jones Industrial Average fell 0.45% to 47,739.32. A renewed climb in the 10-year Treasury yield pressured sentiment, reflecting concern that inflation could remain sticky in early 2026 even if the Fed delivers another rate cut this week.

Recent weeks have brought rising conviction that policymakers will reduce rates once more. Fed funds futures now assign an 89% probability of a cut, a sharp increase from under 67% a month ago. Those expectations helped fuel consecutive weekly gains for the major indexes, supported by softer September core PCE data released Friday. Still, some investors warn that a surprise hold could trigger a swift pullback, with estimates pointing to a potential 2%–3% downside reaction.

Will the Fed Underscore Data Dependence?

Market participants expect Chair Jerome Powell to reinforce a wait-and-see stance after any cut, especially following the slower November ADP print that signaled cooling labor conditions. Powell’s term ending in May 2026 may also allow him to lean away from market expectations for next year’s policy path. Traders are preparing for messaging that stresses incoming economic data rather than forward guidance, leaving rate-cut timing a key uncertainty heading into the new year.

Which Sectors Led or Lagged?

Sector performance leaned defensive, with only technology posting gains. Tech climbed 0.93% to 5,832.39. Communication services, consumer discretionary, and materials were the weakest groups, falling 1.77%, 1.53%, and 1.66%, respectively. Utilities, health care, and energy also posted losses as rising yields weighed on rate-sensitive and commodity-linked names. Industrials and financials held closer to flat but still ended lower.

What Stock Stories Stood Out?

Tech strength was driven by Broadcom, up nearly 3% on reports that Microsoft may shift custom chip development toward the company. Confluent surged 29% after IBM moved toward an $11 billion acquisition. Oracle gained more than 1% ahead of Wednesday’s earnings release.

Outside large-cap tech, Wave Life Sciences more than doubled on encouraging early obesity-drug data, while Structure Therapeutics nearly doubled after announcing positive obesity-pill results.

Paramount rose 7% as it pursued a hostile bid for Warner Bros. Discovery. Carvana and CRH advanced after being added to the S&P 500, while Berkshire Hathaway slipped more than 2% following leadership changes.

What’s the Short-Term Market Outlook?

With sector breadth weakening and Treasury yields firming, short-term sentiment depends heavily on Fed communication. A cut paired with balanced commentary should support a mild upward bias. Any signal that policy easing could slow in 2026 would likely pressure equities, especially high-valuation sectors. Traders should expect elevated headline sensitivity through the Fed meeting and the next set of economic releases.

More Information in our Economic Calendar.