A quiet confidence seemed to settle over Wall Street last week: indexes racked up back-to-back winning weeks, the S&P 500 crept within a hair’s breadth of its October high, and futures traded mostly flat as traders turned their attention to a single, market-moving event — the Federal Reserve’s policy meeting.
A calm before the Fed
After a subdued Friday, Dow futures were slightly higher on Sunday night while S&P and Nasdaq futures held near flat. The mood isn’t euphoric. It’s pragmatic. Investors are pricing in a high probability that the Fed will ease next week — roughly an 87 to 88 percent chance of a quarter-point cut, according to CME FedWatch — and that expectation has been the dominant market force.
A delayed release of the core personal consumption expenditures price index for September landed softer than feared, and consumer sentiment data ticked up just enough to reassure traders without derailing rate-cut bets. That combination trimmed the market’s fear gauge: the VIX has cooled and Treasury yields have nudged modestly higher, with the 10-year hovering around the low 4 percent range.
Liquidity talk and why it matters now
Beyond a single data point, strategists point to a broader tide of liquidity that could keep equities on a favorable track. Forecasters cite the potential for reserve-management operations by the Fed that will add short-term liquidity, continued expectations of additional rate cuts next year, and fiscal moves that could stimulate corporate spending. Those forces, taken together, are the kind of backdrop that tends to lift price-to-earnings ratios and encourage risk-taking.
Fortune’s recent analysis framed this as a possible wave of incoming capital that could push the S&P toward a fresh all-time high — a view shared by a number of big banks that see gains ahead in 2026. Still, as always, markets price probabilities, not certainties. One soft inflation print doesn’t erase longer-term risks like sticky services inflation or geopolitical surprises.
Earnings, deals and micro drivers
The macro story is the headline, but the day-to-day market moves still hinge on company news. This week brings a heavy slate of earnings from names that matter for both retail and tech sentiment: Lululemon, Costco, Broadcom, Oracle and Adobe are among those reporting. Separately, S&P Global announced index changes that will add CRH, Carvana and Comfort Systems to the S&P 500 on December 22, displacing LKQ, Solstice Advanced Materials and Mohawk Industries — a reminder that structural flows tied to index rebalancing can briefly amplify stock moves.
Retail results have offered a mixed but encouraging read on consumers. Ulta Beauty surged after beating profit and revenue forecasts and raising its full-year outlook; Victoria’s Secret surprised to the upside and also lifted guidance. Meanwhile a blockbuster media bid — Netflix reportedly offering to buy Warner Bros. Discovery for about $72 billion in cash and stock — sent ripples through entertainment names, lifting Warner Bros. shares even as Netflix stock sold off on deal concerns.
Where AI fits into the mood
Investors have spent months debating whether AI is a durable profit engine or a frothy magnet for capital. Lately, the market seems less anxious: flows into AI-related stocks have slowed a bit as the broader liquidity story took center stage. That doesn’t mean the technology stopped mattering — developments in AI are still a structural driver of investment decisions. For context on how big tech is integrating advanced models, see coverage of Apple's decision to use a custom Google Gemini model for Siri and innovations like Google Maps' Gemini copilot. These sorts of product moves feed the narrative that AI will reshape revenues over several years, which underpins some of the higher valuations.
What traders are watching closely
- The Fed announcement and the statement language about future cuts and balance-sheet operations.
- Comments from voting Fed members and any signals about leadership or policy tilt.
- Earnings from the big names due this week and any updates on guidance.
- Economic updates such as consumer expectations, which can subtly shift the inflation narrative.
For now, the market looks like a sprinter pausing at the starting blocks: tension in the air, a clear target in sight, and everyone waiting for the referee to blow the whistle. If the Fed delivers what traders expect, we could see a fresh leg higher for stocks. If it surprises — either by holding or telegraphing restraint — the neighborhood of those record highs could get a lot more interesting very quickly.