US equities ended mixed on Tuesday as investors took a cautious stance ahead of the Federal Reserve’s final interest rate decision of the year. The S&P 500 slipped 0.09%, the Nasdaq inched 0.13% higher, and the Dow fell 0.38%, weighed down by weakness in JPMorgan after the bank outlined higher-than-expected 2026 expenses. Despite the mixed moves, the broader market stayed close to recent highs as traders awaited clarity on the path of monetary policy.
Markets are widely expecting another quarter-point rate cut, following reductions in September and October. Fed funds futures now imply an 87% probability of a cut, up significantly from a month ago. The expectation of looser policy helped drive the Russell 2000 small-cap index to a fresh all-time intraday high, as smaller companies are typically more sensitive to shifts in borrowing costs.
Focus on Fed Leadership and Policy Outlook
Beyond Wednesday’s decision, investor attention is turning to the Fed’s longer-term direction, including the economic projections and the tone of its communication. With inflation still proving sticky and economic data clouded by delays from the recent US government shutdown, markets are preparing for a more complex policy environment heading into 2026. Volatility in policy expectations throughout the year has amplified scrutiny over how effectively the Fed is signalling its intentions.
Looking ahead, leadership changes are becoming a central theme for investors. Jerome Powell’s term as chair expires in May 2026, prompting questions about how the next phase of governance may reshape communication and policy strategy. Recent swings in rate-cut expectations have raised concerns about the effectiveness of current guidance, heightening speculation that incoming leadership may seek to recalibrate the Fed’s messaging framework.
Company Highlights and Sector Moves
In corporate news, CVS was among the day’s strongest performers, rising nearly 5% after issuing an upbeat profit outlook for the year ahead. Elsewhere, Exxon Mobil gained 3.4% after lifting its profit forecast on improved output expectations from the Permian Basin and offshore Guyana. Gold prices edged higher, reflecting a mix of cautious positioning and softer bond yields ahead of the Fed announcement.
ASX Outlook
Australian shares are positioned for a stronger open, with SPI futures reversing an early decline to rise 0.3%. The shift followed the Reserve Bank’s decision to hold rates steady, alongside Governor Michele Bullock’s warning that rate cuts remain unlikely for now.
Investors across the region will be watching New Zealand’s net migration data at 8.45am and the Federal Reserve’s rate decision, due early Thursday morning Australian time, as global markets enter a pivotal 48 hours for monetary policy.
