US stocks maintained their losses in late trading on Tuesday, December 31, Beijing time, with the S&P 500 index poised for a third consecutive day of decline. The minutes from the Federal Reserve's December monetary policy meeting highlighted divisions among members, revealing that a majority of officials deemed further interest rate cuts appropriate.
The Dow Jones Industrial Average fell by 70.97 points, or 0.15%, to close at 48,390.96; the Nasdaq Composite dropped 23.27 points, or 0.10%, settling at 23,451.08; and the S&P 500 index declined by 1.61 points, or 0.02%, finishing at 6,904.13. Due to the New Year's Day holiday, public markets will be closed on Thursday. The Federal Reserve's December monetary policy meeting minutes, released on Tuesday, indicated that most officials believed further rate cuts would be suitable if inflation continued to recede over time, as anticipated. However, some officials explicitly stated that they thought interest rates should remain unchanged "for a period" following the December meeting. The minutes from the December 9-10 Federal Open Market Committee (FOMC) meeting continued to reflect internal divisions within the central bank and the difficulty of the most recent policy decision. The minutes noted, "Some officials who supported a rate cut at this meeting indicated that the decision was made after careful consideration of trade-offs and that they could have supported maintaining the target range unchanged." Earlier this month, officials voted 9-3 to cut the benchmark interest rate by 25 basis points for the third consecutive time, bringing it to the range of 3.5%-3.75%. However, they made a subtle adjustment in the post-meeting statement, hinting that officials were less certain about the timing of the FOMC's next rate cut. Despite the FOMC's decision to cut rates by 25 basis points, disagreements among officials persisted. Governor Stephen Milan opposed the 25-basis-point cut, advocating instead for a 50-basis-point reduction. Meanwhile, Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid also dissented, favoring no change to the interest rate. Prior to the release of the minutes on Tuesday morning, investors placed the probability of an FOMC rate cut at the next meeting at less than 20%. Federal funds futures contracts indicated that investors expected at least two 25-basis-point rate cuts over the coming year. The minutes further revealed a deepening divergence of opinions among Fed officials, with policymakers showing significant disagreement over whether inflation or unemployment poses a greater risk to the US economy. The minutes pointed out, "Most participants judged that moving to a more neutral policy stance would help mitigate the risk of a significant deterioration in labor market conditions." Simultaneously, the minutes stated, "Some participants noted that there was a risk that elevated inflation could become entrenched, and that further reductions in the policy rate against the backdrop of still-high inflation readings could be misinterpreted as a weakening of the Committee's commitment to its 2 percent inflation goal." Following the December meeting, Fed Chairman Jerome Powell told reporters that the Fed had lowered rates sufficiently to guard against a more severe downturn in the labor market while continuing to exert downward pressure on inflation. On Tuesday, US President Donald Trump stated that he had a preferred candidate in mind for the next Fed Chairman but was in no rush to make an announcement; he also mentioned the possibility of dismissing the current Fed Chair, Jerome Powell. Pressure on the technology sector on Monday led to the S&P 500 index closing lower for a second consecutive session. The S&P 500 fell 0.35%, while the tech-heavy Nasdaq Composite declined 0.5%. The Dow Jones dropped nearly 250 points. Many of this year's strong-performing large-cap tech stocks faced selling pressure, with AI-concept stock Nvidia falling over 1% and Palantir dropping 2.4%. Barbara Doran, CEO of BD8 Capital Partners, commented, "What you're seeing is concern that we are blowing this [AI] bubble too far." On Monday, declines in the materials sector also weighed on the market. Precious metals mining company Newmont closed down sharply by 5.6%, after silver futures recorded their worst day since 2021. However, silver futures prices staged a significant rebound on Tuesday. Despite recent subdued performance, global equities are still on track for a third consecutive annual gain. The MSCI All-Country World Index has risen approximately 21% for 2025 and is poised for its best annual performance since 2019. Mohit Mirpuri, Senior Partner at Singapore's SGMC Capital, said, "This pullback looks more like a healthy consolidation rather than a change in trend." Historical patterns give investors reason for optimism as they enter the new year. Data shows that over the past ten years, the index has averaged a gain of 1.4% in January, with positive returns in six of those years. Investors are also assessing the outlook for US interest rates and monetary policy. Wall Street interest rate strategists, with few exceptions, generally expect US Treasury yields to remain stable or even higher in 2026, even if the Federal Reserve cuts rates. On the economic data front Tuesday, US home price growth accelerated slightly in October, led by cities in the Northeast. The pace of US home price increases picked up modestly in October, with growth in Northeastern cities outpacing that in Sun Belt metropolitan areas. The S&P CoreLogic Case-Shiller data showed the national home price index rose 1.4% year-over-year. This compares to a 1.3% annual increase in September. Increased inventory of listed properties across many US regions has given buyers more leverage in negotiations with sellers. However, the number of buyers willing to commit to a purchase remains low. Although mortgage rates eased slightly in the three months leading to October, they stayed above 6%. Concerns about a potential recession and a weakening job market have also kept transaction activity subdued. "October's data signals a noticeable slowdown in the US housing market," said Nicholas Godec, Head of Fixed Income Trading and Commodities at S&P Dow Jones Indices, in a statement. "Nationally, home prices also continue to lag behind consumer inflation." Among 20 major US cities, Chicago saw the highest price increase, up 5.8% year-over-year; New York followed with a 5% gain, and Cleveland prices rose 4.1%. Tampa experienced the largest decline, with prices falling 4.2% compared to the previous year. Prices also dropped in Dallas, Miami, and Phoenix. In other markets, Bitcoin saw heightened volatility, paring gains after briefly surpassing $90,000 in the previous session. A key dollar index gauge edged lower. Oil prices maintained their upward trend as traders weighed geopolitical tensions in Venezuela, Russia, and Iran against concerns about oversupply.
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