Expectations for rate cut in January drop
Following Trump’s election victory, U.S. Treasury yields rose, and expectations for the Fed to cut interest rates this winter have declined.
The federal funds rate determines what banks charge for overnight lending, and currently has a target range of 4.75% to 5.0%. At this point, it is almost a foregone conclusion that the Federal Reserve will decide to cut interest rates by 25 percentage points (equivalent to 25 basis points) at Thursday’s meeting.
According to market pricing, the probability of another 25 basis point interest rate cut in December is currently 71% CME FedWatch Tool. The chance on Wednesday was 77%, compared with 72% a week ago. Future interest rate odds in CME’s FedWatch tool are derived from trading in the 30-day Fed Funds futures contract.
On the other hand, expectations for a rate cut in January have changed due to Wednesday’s election. The CME Group’s FedWatch tool points out that the market is currently pricing in favor of suspending interest rate hikes in January.
In fact, the probability of another quarter-percentage point rate cut in January, following cuts in November and December, has fallen to 29% from 41% on Wednesday and 45% a week ago. Meanwhile, the probability that the Fed will keep interest rates unchanged in January has climbed to 54% from 48% on Wednesday and 44% last week.
—Lisa Kelley Han
Check after-hours stock trends
Here are some stocks that have performed strongly over the long term:
- Lyft — Shares of the ride-hailing company rose nearly 20%. Third-quarter revenue was $1.52 billion, beating consensus estimates of $1.44 billion, according to LSEG. Lyft forecast fourth-quarter bookings of $4.28 billion to $4.35 billion, beating Wall Street expectations, although the FactSet consensus forecast was just $4.23 billion.
- Solar Edge Technologies, Inc. — The maker of residential solar inverters fell 18% after third-quarter revenue fell short of Wall Street estimates.
- Elf beauty — Cosmetics retail stocks rose 11% after a stronger-than-expected quarterly report and higher guidance.
See the full list here.
— Alex Harling
Stock futures little changed
Stock futures were essentially flat shortly after 6 p.m. ET.
Futures tied to the Dow, S&P 500 and Nasdaq 100 were all trading slightly above flat. The move came after stocks surged in the previous session following the election.
— Alex Harling
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