Stocks trended lower throughout Monday's session as caution set in ahead of the December Fed meeting. The central bank is widely expected to announce its third straight quarter-point rate cut Wednesday afternoon. However, uncertainty remains about what's in store for interest rates and the economy in 2026.
"This week's FOMC decision could set the tone for the remainder of 2025 and beyond, shaping expectations for monetary policy, risk appetite, and market leadership," says Mark Hackett, chief market strategist at Nationwide.
Another rate cut "would reinforce the narrative of easing financial conditions," while "any deviation from the expected path, or hawkish commentary, could recalibrate positioning and volatility as investors reassess the Fed's resolve," Hackett adds.
According to CME Group FedWatch, futures traders are pricing in an 87% chance that the Federal Reserve lowers its benchmark rate by a quarter-percentage point – up from 67% one month ago. Odds are currently for two additional 0.25% cuts in 2026.
Wall Street will also see what the Fed expects for next year, too, with the December meeting featuring the release of the Summary of Economic Projections (SEP), or "dot plot," which summarizes each member's expectations for monetary policy going forward.
In September, the dot plot revealed median expectations for just one quarter-point rate cut in 2026, following three in 2025.
At today's close, the blue-chip Dow Jones Industrial Average fell 0.5% to 47,739, the broader S&P 500 slipped 0.4% to 6,846, and the tech-heavy Nasdaq Composite shed 0.1% to 23,545.
Confluent soars 29% on IBM buyout buzz
Confluent (CFLT) was one of the biggest advancers on Monday, jumping 29.1% after International Business Machines (IBM, +0.4%) said it will buy the data streaming platform in a deal valued at $11 billion.
"With the acquisition of Confluent, IBM will provide the smart data platform for enterprise IT, purpose-built for AI," said IBM CEO Arvind Krishna in the press release.
"A sale to IBM makes sense to us and reflects a combination of platform value (data streaming technology enabling real-time workflows, analytics) and current valuation," says Oppenheimer analyst Ittai Kidron. And Big Blue's broad data portfolio and open-source assets "make a good fit for Confluent."
The acquisition is expected to close by mid-2026.
Paramount makes hostile bid for Warner Bros. Discovery
In other M&A news, Paramount Skydance (PSKY, +9.0%) is launching a hostile bid for Warner Bros. Discover (WBD, +4.4%) after the entertainment and media company announced last week that it will sell its streaming and studio assets to Netflix (NFLX, -3.4%).
Paramount said it will bypass WBD's board of directors and take its $30 per-share bid straight to shareholders, representing a 15% premium to WBD's December 5 close.
But Bernstein analyst Laurent Yoon isn't so sure that'll fly. "If PSKY goes directly to shareholders with the same proposal WBD's board already rejected, we remain skeptical that shareholders would view that offer as superior to NFLX's – at minimum, it's far from a slam dunk, assuming the Board went through a rigorous evaluation process," he wrote in an early morning note.
Yoon has an Underperform (Sell) rating in PSKY, an Outperform (Buy) rating on NFLX and a Market Perform (Hold) rating on WBD.
Carvana to join the S&P 500
Elsewhere, Carvana (CVNA) jumped 12.1% after S&P Dow Jones Indices said it will add the online used car retailer to the S&P 500, effective ahead of the December 22 open.
Ireland-based building materials firm CRH (CRH, +5.9%) and HVAC specialist Comfort Systems USA (FIX, -1.2%) will also join the broad-market index.
The three stocks will replace LKQ (LKQ, -2.0%), Solstice Advanced Materials (SOLS, -0.9%) and Mohawk Industries (MHK, -1.8%).
