"There is an 88% chance that the Fed will cut 0.25% off interest rates on Dec. 10, according to the rarely wrong CME FedWatch futures market, but that implied promise of a fresh round of cheaper money wasn't enough to boost U.S. stock futures this morning. S&P 500 futures were down 0.64% premarket; Nasdaq 100 futures were down 0.78%. The pessimism started in Asia, with Japan's Nikkei 225 down 1.89% and the South Korea KOSPI down 0.16%."
"It was all a stark contrast to Friday's trading in the U.S., when the S&P closed up for its fifth straight session. The talk over the weekend was that this signaled the beginning of a "Santa Rally," the myth that stocks do well in December as traders enjoy the jollity of the holiday season (and the Q4 corporate revenue picture becomes clearer)."
"Those fears took shape in the form of Morgan Stanley's argument that hedge funds are effectively shorting Oracle's AI debt by buying credit default swaps on its bonds (a type of insurance that pays out if a debtor defaults). Traders are becoming increasingly skeptical of the way AI companies are fueling their growth via debt rather than revenues. There may yet be good news for stocks on the horizon, particularly if the U.S. Federal Reserve delivers that cut in December."
There is an 88% probability the Federal Reserve will cut 0.25 percentage points on Dec. 10 per CME FedWatch futures. U.S. stock futures fell in premarket trading, with S&P 500 futures down 0.64% and Nasdaq 100 futures down 0.78%. Asian and European markets were weaker, led by Japan's Nikkei 225 and the STOXX Europe 600. The S&P 500 remains up 16.5% year-to-date, but tech-sector declines and a sharp Bitcoin drop to about $85K dented sentiment. Concerns about an AI bubble and hedge funds buying credit default swaps on Oracle bonds raised skepticism about growth financed by debt rather than revenues.
Read at Fortune
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