U.S. Futures Slip as Rate-Cut Bets, Fed Shakeup Grab Market Attention

U.S. Futures Retreat on Rate-Cut Expectations, Fed Uncertainty

U.S. stock futures drifted slightly lower on Monday as traders reassessed the likelihood of an interest rate cut at the Federal Reserve’s December meeting. By 06:28 ET, contracts tied to the S&P 500 were modestly in the red by about 0.6%, Nasdaq 100 futures were down roughly 0.7%, and Dow Jones futures had eased about 0.5%.

The move comes after all three major benchmarks advanced more than 3% in the holiday-shortened week, extending a solid run for both the S&P 500 and the Dow through November. The Nasdaq Composite, however, ended the month lower by 1.51%, reflecting ongoing unease around stretched tech valuations and the pace of heavy, often highly leveraged, investment into artificial intelligence.

Market positioning has increasingly tilted toward a 25-basis-point rate cut when policymakers convene on December 9–10. Probabilities for such a move have climbed to roughly 88%, up sharply from the mid-40% range just over a week earlier.

Hints from Federal Reserve officials that policy conditions may soon justify easing have added momentum to those expectations. Even so, visibility remains limited, especially after the recent federal government shutdown reduced the flow of fresh economic data.

The week ahead includes a dense lineup of indicators, from manufacturing and services surveys to consumer sentiment readings and private-sector hiring figures. Retailers could also draw increased market focus, following reports of a strong jump in online spending during the Black Friday shopping period.

Who Will Lead the Fed Next?

Investors are still digesting President Donald Trump’s comment that he has settled on a candidate for Fed Chair, even though he chose not to identify the nominee.

White House economic adviser Kevin Hassett is widely viewed as the leading contender for the next Federal Reserve appointment. While Hassett has played down the speculation, he has indicated his willingness to accept the position if asked. Additional candidates reportedly on the list of potential picks include former Fed Governor Kevin Warsh and current Governor Christopher Waller.

Any change at the top of the central bank could have meaningful consequences for the direction of U.S. monetary policy. Multiple accounts have indicated that Trump is likely to choose an ally to succeed Jerome Powell, whose term expires in May.

Given the president’s frequent push for faster and deeper rate cuts, a new chair aligned with that view could signal a shift toward a more dovish policy stance. Such a move may offer further support to equity markets, particularly sectors that benefit from lower borrowing costs, including retail names and high-growth companies.

Powell Avoids Discussing Economy, Interest Rates

Federal Reserve Chair Jerome Powell strictly adhered to protocol during his address at Stanford University, explicitly declining to comment on current economic conditions or the future of monetary policy.

This silence was anticipated, as the Fed's mandated pre-meeting blackout period is now in effect ahead of next week's FOMC gathering. Furthermore, the timing of the speech, coinciding with the end of Quantitative Tightening (QT), meant any unplanned comments could have risked prematurely influencing market liquidity flows ahead of the Fed's eventual move toward Quantitative Easing (QE).

Bottom line

U.S. futures weakened as investors reassessed expectations for a December rate cut while awaiting clearer economic signals and clarity over forthcoming Federal Reserve leadership. With the Fed in its pre-meeting blackout period, markets will receive no additional policy guidance until next week’s FOMC decision.