Bonds & Stocks
Stocks are marking a second day of muted trading as traders wait to hear the Federal Reserve’s views on interest rates for 2026. The S&P 500 and Nasdaq 100 edged down, with shares of Microsoft Corp. dropping 2.2%, as a rally in US stocks has stalled this week. US bonds were mixed. The 10-year rate steadied after rising as much as two basis points to 4.21%, the highest since the first week of September. Globally, a view that rate-cutting cycles are nearing their end has driven yields on a Bloomberg gauge of long-dated government debt to a 16-year high.
Economy
Bond traders are betting on a shallower path of Federal Reserve interest rate cuts in the year ahead, with traders now anticipating a half-point of total reductions by the US central bank in 2026. The shift has occurred before the release of key delayed labor-market data, which will likely determine whether the market’s current view on the Fed will hold, and against the backdrop of stubborn price pressures. The diminishing expectations for Fed rate cuts is starting to play out in futures linked to the Secured Overnight Financing Rate, with traders hedging against a scenario where the Fed wraps up its cutting cycle by around mid-year, before pausing.
World
Microchip manufacturers Intel Corp., Advanced Micro Devices Inc. and Texas Instruments Inc. were accused of failing to keep their technology out of Russian-made weapons used to kill and wound civilians in Ukraine. The lawsuits claim the companies demonstrated "willful ignorance" as third parties resold restricted chips to Russia to power drones and missiles in violation of US sanctions. The companies are accused of "domestic corporate negligence" over alleged failures in their export control and diversion-prevention systems, allowing their semiconductor components to be illegally diverted to Russia and Iran.