The S&P 500 pulled back on Monday as investors positioned themselves for the Federal Reserve’s final policy meeting of the year. The index fell 0.35% to close at 6,846.51, while the Nasdaq Composite slipped 0.14% to 23,545.90. The Dow shed 215 points, finishing 0.45% lower at 47,739.32.
Market sentiment was pressured by another rise in the 10-year Treasury yield, which continued climbing despite expectations of a rate cut later this week. The benchmark yield’s upward move reflects ongoing concerns about inflation heading into the new year and whether the central bank will have scope to continue easing beyond December.
Traders have steadily increased their expectations of a cut. Futures markets now price in an 89% probability of a reduction, up sharply from 67% a month ago, following back-to-back quarter-percentage-point cuts in September and October. That optimism has underpinned recent strength in equities, with the S&P 500 and Nasdaq closing out their second consecutive positive week and marking four-day winning streaks on Friday. Softer-than-expected September core PCE data, one of the last major economic figures before the meeting, further supported that momentum.
Looking ahead, investors expect the Fed to pair any cut with a firm reminder that decisions remain data-dependent, especially after last week’s ADP figures signalled further cooling in the labour market. With Jerome Powell’s term expiring in 2026, markets are preparing for a cautious tone on the path of rates next year.
Tech stocks outperform as deal activity accelerates
Technology names were a rare bright spot in Monday’s session. Broadcom rose nearly 3% and hit a fresh record after reports that Microsoft is exploring custom chip design with the company. Confluent surged almost 29% after IBM announced plans to acquire the data-streaming firm in an US$11bn deal expected to close by mid-2026. Oracle added more than 1% ahead of Wednesday’s quarterly results.
It was also a major day for M&A. Warner Bros Discovery jumped 7.2% after Paramount Skydance launched a US$108.4bn hostile takeover bid for the iconic studio. Paramount shares edged higher, while Netflix slipped as investors assessed the competitive landscape for streaming and content.
ASX set for weaker open ahead of RBA decision
Australian shares are poised to open lower, with SPI futures down 24 points or 0.28% to 8609. The Reserve Bank of Australia is widely expected to keep the cash rate on hold on Tuesday, but investors will be focused on Governor Michele Bullock’s comments on inflation and the outlook for 2026. Bond markets continue to price in at least one rate increase next year.
Local data will also be in focus, with the NAB business survey due at 11.30am AEDT. In the US, JOLTS job openings data is scheduled for release at 2am AEDT on Wednesday.
