US Indices Analysis: No December Cut? Fed Policymakers Rattle US Stocks with Hawkish Shift

Stocks Tumble as Fed Officials Push Back on December Rate Cut

U.S. stock index futures edged lower early Friday, pointing to another rough session on Wall Street after a hawkish shift from Federal Reserve officials triggered Thursday’s steepest selloff in over a month.

All three major indexes posted sharp losses, with tech stocks leading the retreat, as a growing chorus of Fed policymakers signaled reluctance to cut rates in December.

The move comes as markets navigate a data drought caused by the recently ended government shutdown — the longest in U.S. history — which has left both the Fed and traders flying blind on inflation and labor market trends.

As of 11:18 GMT, Dow E-minis were down 159 points (-0.33%), S&P 500 E-minis dropped 31.25 points (-0.46%), and Nasdaq 100 E-minis fell 203.50 points (-0.81%).

Collins Pours Cold Water on Easing Hopes

Boston Fed President Susan Collins was the main catalyst behind Thursday’s selloff. In remarks that continued to ripple through the market a day later, Collins signaled she sees a “relatively high bar” for additional easing.

While she supported October’s quarter-point cut, she warned that further accommodation risks derailing the Fed’s progress on inflation — especially with the labor market still holding together and inflation data thin due to the recent government shutdown.

Her message was clear: absent a material deterioration in labor market conditions, she’s not ready to vote for another cut. That caught traders off guard, particularly after weeks of rising expectations for year-end easing.

Daly Leans Neutral, Not Dovish

Adding to the caution, San Francisco Fed President Mary Daly told an audience in Dublin that it’s too soon to commit to any move in December. Daly, often viewed as one of the more dovish voices at the Fed, emphasized a “neutral” policy outlook, saying there’s no clear case — yet — for either a cut or a hold. Coming from her, that reinforced the idea that the easing door isn’t as open as markets had believed.

Between Daly and Collins, it’s becoming clear the Fed is preparing to stand pat unless the data shifts significantly in the next few weeks.

Traders Slash Odds of a December Cut

The market’s reaction was swift and sharp. Rate cut odds for December plummeted to just 49.4% by Thursday afternoon, down from 95% a month ago. Even earlier in the week, markets were pricing in a solid 2-to-1 chance of another cut. That repricing hit risk assets across the board, with tech and crypto bearing the brunt of the damage.

Tech Takes It on the Chin

The Nasdaq led the selloff, dragged down by outsized losses in high-flyers like Tesla (-6.6%), Palantir (-6.5%), and Nvidia (-3.6%). Traders appear to be questioning whether AI-heavy names can justify their lofty valuations without further help from falling interest rates. For now, the Fed’s message is clear: it’s not ready to step in again.

More Fed Speak on Deck Friday

Traders now turn their attention to Friday’s speakers — FOMC Members Jeffrey Schmid, Lorie Logan, and Raphael Bostic — who are all scheduled to speak and could either echo or soften the tone set by Collins and Daly. With the next major data releases still ahead, markets will be listening closely for any signs of a shift.

Bottom Line: Powell’s Pause Looks Sticky

The Fed’s coordinated messaging suggests the path of least resistance is to hold rates steady in December. Unless the inflation data shows a material downside surprise, the bar for additional cuts remains high. Traders hoping for an end-of-year gift from the Fed may be left waiting.

More Information in our Economic Calendar.