16 Dec Stocks Mixed As Investors Prepare For Fed Decision On Wednesday

On Monday (16 Dec) we saw stocks trading in a mixed mode similar to last Friday, as investors prepare for the Federal Reserve's decision this week on interest rates, while bitcoin surged to a record high.

NASDAQ rose by 1.24% and S&P 500 gained 0.38% though both indexes closed below their session highs. On the hand, DJIA ended the session 0.25% lower after trading higher initially.

The S&P 500 was coming off its first losing week in the past month, while the tech-heavy Nasdaq Composite is riding a four-week winning streak after crossing 20,000 points for the first time last week.

Investors capitalized on the recent market weakness following last week's pullback, aligning with a typically strong period for equities in the latter half of December.

At the start of the session, advancers outnumbered decliners by a 3-to-2 margin on both the NYSE and Nasdaq. By the close, the NYSE saw decliners leading advancers by the same margin, while the Nasdaq maintained a slight advantage for advancers.

Bitcoin was trading at $105,900 recently after hitting an all-time high of $107,800 earlier in the afternoon. Bitcoin has gained 50% since the presidential election amid investor optimism that the incoming Trump administration and a supportive Congress will adopt policies that benefit the cryptocurrency market.

Shares of MicroStrategy (MSTR), one of the world's largest holders of bitcoin, finished fractionally lower after rising as much as 7% early in the day as the digital currency gained. The stock also got a boost following news that the company will be included in the Nasdaq 100, along with Palantir (PLTR) and Axon Enterprise (AXON). MicroStrategy has gained more than 500% since the start of 2024.

Unexpected Inflation Data Saw RIsing Interest Rates

Rising interest rates, which increased after unexpected inflation data, initially curbed buying interest. The 10-year Treasury yield increased by one basis point to 4.41%, before dropping eight basis points to 4.397%.

The 2-year yield rising similarly to 4.25% before dropping eleven basis points to 4.253%.

Only Four S&P 500 Sectors Ended In The Green

The consumer discretionary sector make the largest gains of 1.74%, followed by communication services with 1.29% gain, both information technology and industrials gained 1.01% and 0.08% to make them the only positive performers.

Equal-weighted S&P 500 fell by 0.3%, with declines in seven sectors. The energy sector experienced the largest drop of 2.2% due to crude oil futures were down nearly 1%.

Health care and materials sectors also saw declines of 1.3% and 1.0%, respectively. Despite these pressures, certain stocks performed strongly, supporting the S&P 500 and Nasdaq. Notable gainers included Broadcom (AVGO) helped technology, Alphabet (GOOGL) helped communication services, and Tesla (TSLA) helped consumer discretionary, all achieving new 52-week highs.

Significant Stocks Movement and What Lies Ahead

Large-cap technology stocks were mostly higher on Monday, led by an 11% gain for chipmaker Broadcom (AVGO), which on Friday joined the exclusive club of companies with a market capitalization of greater than $1 trillion following a strong earnings report.

Tesla (TSLA) rose 6.1% to a new record high as Wedbush raised its price target on the stock. Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN) and Meta Platforms (META) were also higher, while Nvidia (NVDA) dropped 1.7%.

Among other noteworthy movers, shares of Super Micro Computer (SMCI), which will be removed from the Nasdaq 100 index as of next Monday, slid 8.3% following a report the company has hired Evercore to potentially assist the company in raising capital. The decision to drop Supermicro from the index comes as the server maker faces a February deadline to file its delayed annual report, or face delisting by the Nasdaq. 

FOMC Meeting Which Starts On Tuesday

The two-day meeting of the Federal Reserve's policy committee, which is scheduled to start Tuesday will be the big event for market to watch this week and for this year. The Fed is widely expected to cut its benchmark interest rate, as it did in September and again last month. In addition to the decision on rates, investors will be paying close attention to what Fed officials say about the health of the economy and the outlook for rates in 2025.

The current CME FedWatch tool show that there is a slight increase of the probability from 96.0% to 96.3% as compared to 13 Dec 2024.

Stocks To Watch

$Rivian Automotive, Inc.(RIVN)$ experienced a significant surge, climbing 6.75% in afternoon trading on Monday. Despite being down over 30% year-to-date, Rivian's recent 48% increase has outpaced Tesla (TSLA) over the last six weeks. The stock reached its highest level since late July, buoyed by positive sentiment from Benchmark analysts who see a large market opportunity for Rivian in the coming decade.

Though RIVN has surged quite high, but there are still some signs of more upside ahead, with RIVN currently trading above short-term and long-term MA, and MACD is also making an upside movement, there are some rooms for RIVN to make another breakout.

One of the signal I will be watching would be the MTF, as there is potential upward trend coming, I will be watching the price action to get into RIVN.

$Quantum Computing Inc.(QUBT)$ led a rally in quantum stocks, surging 68% in late afternoon trading. The stock has soared approximately 370% over the past month, alongside D-Wave Quantum (QBTS) and Rigetti Computing (RGTI), which also saw substantial gains. Morgan Stanley analysts noted the growing investment interest in quantum technology, despite the lack of a clear catalyst for such rapid appreciation.

$Affirm Holdings, Inc.(AFRM)$ announced plans to offer $750 million in convertible senior notes due 2029, using proceeds to repurchase existing notes and shares. The offering is part of Affirm's strategy to manage its debt and share repurchase plans.

$Tesla Motors(TSLA)$ stock popped 6.1% to an all-time high as Wedbush analysts discussed the potential upside of carmakers' AI and full self-driving (FSD) technology under the incoming presidential administration. Wedbush estimated that Tesla's full self-driving and AI opportunity alone could be worth $1 trillion and expressed confidence that the Trump White House will streamline approval processes for these initiatives.

Shares of $Micron Technology(MU)$ jumped 5.6% as the data storage chipmaker prepares to release its quarterly results on Wednesday afternoon. Consensus estimates call for strong year-over-year sales and profit growth. Earlier in December, Micron received around $6 billion in grants under the federal CHIPS Act to produce semiconductors in the U.S.

Summary

As investors are still preparing and adjusting their portfolio ahead of Fed decision on rate cut, and what could be possible for 2025, we could see some investors doing some profit taking while looking to put the funds in some other appreciating assets or stocks.

So I would expect market to be trading in a mixed mode but positive bias should increased and build up for a more positive Wednesday when we heard the Fed decision.

Appreciate if you could share your thoughts in the comment section whether you think market would still be trading in a mixed mode.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.