U.S. Futures Edge Up as Markets Brace for Fed Decision and Chip, Media Headlines

Key Moments

Futures Inch Higher Before Fed’s Final Meeting of the Year

U.S. stock index futures traded a touch higher on Tuesday as investors adopted a cautious stance ahead of the Federal Reserve’s last policy meeting of the year, a gathering that is expected to shape sentiment heading into the new year.

At 05:35 ET (10:35 GMT), Dow Jones Futures were up 30 points, or 0.1%, S&P 500 Futures advanced 8 points, or 0.1%, and Nasdaq 100 Futures added 25 points, or 0.1%.

Major U.S. equity indices finished in negative territory in the prior session. A rise in Treasury yields weighed on risk assets, suggesting traders may be pulling back in advance of the Fed’s announcement scheduled for Wednesday.

Fed Rate Cut Expectations and Policy Outlook

The start of the Federal Open Market Committee’s latest two-day meeting is in sharp focus. Market participants broadly anticipate that policymakers will conclude the gathering on Wednesday with a reduction in U.S. interest rates.

Positioning has tilted toward a 25-basis point cut after data indicated pressure on the U.S. labor market alongside inflation that has remained steady but still elevated. According to CME FedWatch, the probability of an adjustment from the Fed’s current 3.75%-4% target band has climbed to around 89%.

However, the decision is not seen as a foregone conclusion. Some officials have recently highlighted their unease about implementing a third rate cut since September during a period when fresh economic data has been limited by a record-long government shutdown. As a result, this meeting could become one of the most divisive in recent years.

“There are now high expectations of a ’hawkish cut’ at Wednesday evening’s FOMC decision,” said analysts at ING, in a note.

Beyond the headline rate move, investors will scrutinize how the Fed characterizes the outlook for the U.S. economy, particularly given what the article describes as heightened uncertainty around the trajectory of the world’s largest economy.

Corporate Focus: Nvidia and Key Earnings

Tuesday’s calendar includes a handful of corporate earnings updates from AutoZone (NYSE: AZO), Campbell’s (NASDAQ: CPB), AeroVironment (NASDAQ: AVAV) and Cracker Barrel Old Country Store (NASDAQ: CBRL).

Still, Nvidia (NASDAQ: NVDA) is likely to sit at the center of market attention. President Donald Trump said in a Truth Social post that he will allow the chipmaker to sell its H200 artificial intelligence processors to approved customers in China and other jurisdictions, subject to a 25% tariff and additional limitations designed to protect U.S. national security.

Trump noted that he had conveyed this decision to Chinese President Xi Jinping, and said that Xi “responded positively.”

The H200, introduced in 2023 as the successor to Nvidia’s H100 chip, is estimated to be roughly six times more powerful than the H20, which is described as the most advanced AI chip that Nvidia is currently permitted to sell into the Chinese market.

Nvidia’s chips are broadly deployed by Chinese firms working on AI applications, and Trump’s Monday announcement laid out a potential avenue for increased sales for the company, which the article refers to as the world’s most valuable.

Media and Streaming: Competing Bids for Warner Bros Discovery

Warner Bros Discovery (NASDAQ: WBD) has attracted another bidder in the ongoing reshaping of the media and streaming landscape. Only days after Netflix (NASDAQ: NFLX) was reported as the winner in a competitive auction for the studio, Paramount Skydance (NASDAQ: PSKY) said it has initiated a hostile takeover proposal valued at $108.4 billion.

The Paramount Skydance proposal would exceed the $72 billion equity deal that Netflix had secured for Warner’s television, film studio, and streaming businesses. Importantly, the competing offer would cover the entirety of Warner, including its cable television networks.

Oil Prices Steady as Ukraine Peace Efforts Watched

Crude prices were broadly stable on Tuesday, pausing after a weaker prior session, as traders monitored diplomatic efforts related to Russia’s war in Ukraine.

Brent futures gained 0.2% to $62.64 per barrel, while U.S. West Texas Intermediate crude futures ticked up 0.3% to $59.03 per barrel.

Both benchmarks had fallen by 2% on Monday following news that Iraq is moving ahead with the restoration of production at the West Qurna-2 oilfield, a facility that accounts for a significant portion of the country’s exports.

On the geopolitical front, Ukraine has indicated that it plans to present a revised peace proposal to the U.S. after discussions in London between President Volodymyr Zelenskiy and leaders from France, Germany, and Britain.