Wall Street Drifts as Traders all But Bet on Fed Rate Cut Next Week

CNBC and Reuters contributed to this report.

US stocks barely budged Thursday as traders waited on next week’s Federal Reserve decision, increasingly convinced they’re about to get a December interest rate cut.

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all hovered around the flatline for most of the session, with only modest moves in either direction despite a busy stream of economic data and corporate headlines.

The big story wasn’t price action — it was expectations.

Fresh signs of a cooling labor market have Wall Street almost certain the Fed will trim rates by a quarter percentage point at its Dec. 10 meeting, the last one of the year. Futures markets are now pricing in roughly an 87% chance of a cut, sharply higher than just a couple of weeks ago, according to the CME FedWatch tool.

“The markets have done well year to date, with strength in the back half of November, and I think it wouldn’t be surprising to me to see markets just kind of move sideways from here,” said Tim Holland, chief investment officer at Orion.

“The big news is the 25 basis point rate cut, but that’s been so widely telegraphed, I’d be shocked if we didn’t get it. The market expects it,” he added, suggesting stocks may simply “mark time” into year-end before 2026 sets the next tone.

Thursday’s calm came after several pieces of labor data painted a slightly confusing picture:

• Challenger, Gray & Christmas reported announced layoffs in November pushed total job cut plans for 2025 above 1.1 million, the highest level since 2020. Companies cited restructuring, AI and tariffs as reasons for trimming headcount.
• On Wednesday, ADP data showed a surprise drop in private payrolls, further suggesting hiring is slowing.
• Yet weekly jobless claims — a more real-time snapshot of the job market — fell sharply. Initial claims dropped to 191,000 for the week ended Nov. 29, the lowest level since September 2022 and far below expectations for 220,000.

Most economists chalked the claims plunge up to seasonal quirks around Thanksgiving rather than a sudden surge in hiring. Still, the fact that claims remain low reassured investors that the economy isn’t falling off a cliff even as layoffs tick higher.

“With each data point that tells us the bottom isn’t falling out, I think the markets breathe a sigh of relief,” Holland said. “Even though the initial claims data today was skewed by the Thanksgiving holiday, I think that was very well received. I don’t think you’re going to get any data that knocks the Fed off of a cut next week between now and then.”

More key numbers are coming Friday, when the Commerce Department releases delayed September data on consumer spending and incomes and the PCE price index, the Fed’s preferred inflation gauge. The University of Michigan’s December consumer sentiment survey is also on deck.

Under the hood, there were some notable movers even as the major indexes stalled.

Salesforce was a standout winner, climbing more than 3% after the software giant issued a better-than-expected revenue forecast. Analysts see potential for a big AI-driven rebound in the stock after a rough year, even if investors were somewhat cautious in the immediate reaction.

Elsewhere in tech, the once-unstoppable AI trade showed more cracks. The sector has had a huge run, but recently Microsoft, Nvidia and Broadcom have all seen some selling pressure, leaving tech as the day’s weakest S&P 500 sector in the prior session.

At the same time, some of the biggest winners of the year aren’t the headline AI names, but the companies building the infrastructure behind them. Western Digital and Seagate Technology — both tied to data storage demand — are the S&P 500 tech sector’s top performers this year, up more than 255% and 206% respectively as AI fuels massive demand for hard drives and storage systems.

They’re followed by names like Micron Technology, Palantir, Lam Research, AppLovin and Intel, while component and equipment makers such as Jabil and Amphenol have also quietly outpaced even high-flyers like Nvidia and Microsoft.

Several individual stocks made notable midday moves:

• Meta Platforms jumped about 4% after a report that the company is considering cutting headcount in its metaverse division by as much as 30% in 2026.
• Kroger slid roughly 6.5% after its third-quarter numbers underwhelmed Wall Street. Revenue missed estimates, same-store sales (excluding fuel) rose 2.6% versus the 2.9% expected, and margins came in a bit light.
• Science Applications International (SAIC) surged about 17% after posting a big earnings beat and raising its 2026 and 2027 profit outlook, citing stronger federal contract trends.

In early trading, broader indices briefly moved higher, with each of the Dow, S&P 500 and Nasdaq up around 0.2%, but those gains faded as the day went on.

Outside of stocks, natural gas continued its winter rally. January futures briefly hit $5.046 per million BTUs, the highest level since late 2022, as frigid weather gripped parts of the Midwest and East Coast.

Nat gas prices are up nearly 50% so far in the fourth quarter and about 36% for the year after a 45% surge in 2024. Producers have enjoyed the ride: the First Trust Natural Gas ETF is on track for its best quarter since early 2024, helped by big gains in names like Baytex Energy, Comstock Resources, CNX Resources, BKV and Gulfport Energy.

Global markets were similarly cautious. European stocks inched higher, Japan’s Nikkei rallied on strong demand at a bond auction, and the US dollar index drifted lower, extending a rare multi-day losing streak against major currencies.

Back in the US, the 10-year Treasury yield ticked up to around 4.09%, but all eyes remain on the Fed.

With traders almost unanimous in expecting a quarter-point cut next Wednesday, the real risk now may be in the messaging. If the Fed cuts and then signals a long pause, or decides to hold off entirely and wait until the next meeting, markets that have already priced in easier policy could be disappointed.

For now, though, stocks seem content to move sideways, digest a year’s worth of gains — and wait for the central bank to make its next move.