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Investors look to Fed meeting, inflation data
U.S. Treasury yields fell on Monday as investors sought out safe-haven assets amid a massive stock market sell-off.
The 10-year Treasury yield slipped eight basis points to 4.54%, while the 2-year Treasury yield was last trading at 4.208% after falling more than six basis points.
One basis point equals 0.01% and yields move inversely to prices.
U.S. stock futures tumbled on Monday, with Nasdaq 100 futures being especially hit by a large decline in the technology sector.
Last week, Chinese AI startup DeepSeek released an open source AI model that reportedly outperformed OpenAI’s in several tests. The company said it launched the large-language model in December for less than $6 million, causing investors to question the billions of dollars they have spent to build and train AI models.
Elsewhere, investors are gearing up for a busy week, with the Fed set to announce its next monetary policy decision at its January meeting on Wednesday.
The Fed is facing pressure from newly inaugurated President Donald Trump, who said he expects to see interest rates come down during a keynote address at the World Economic Forum in Davos, Switzerland, last week.
“I’ll demand that interest rates drop immediately,” Trump said at the forum, speaking to an audience of global leaders. “And likewise, they should be dropping all over the world. Interest rates should follow us all over.”
However, traders are pricing in a more than 99% chance that the Fed will leave interest rates unchanged, according to the CME Group’s FedWatch tool. At its December meeting, the Fed penciled in only two interest rate cuts in 2025.
Investors will also await the release of the personal consumption expenditures price index for December on Friday — the Fed’s preferred inflation gauge — which will offer fresh insights into the health of the U.S. economy.
As investors eagerly await the outcome of the Federal Reserve’s latest meeting and the release of key inflation data, the financial markets are on edge. With concerns mounting over rising prices and the potential impact on interest rates, all eyes are on the central bank for guidance on future monetary policy.
The Fed’s meeting this week is expected to provide insight into how policymakers plan to address inflationary pressures and whether they will consider raising interest rates sooner than anticipated. Inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), will also play a crucial role in shaping market sentiment.
Investors are hoping for clarity and reassurance from the Fed on its approach to managing inflation while supporting economic growth. Any hints of a more hawkish stance could lead to increased market volatility, while dovish comments may provide a sense of stability.
As the Fed meeting and inflation data loom large, investors are bracing for potential market fluctuations and adjusting their portfolios accordingly. Stay tuned for updates on how these key events will impact the financial markets.
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