U.S. Stock Index Futures Opened 2025 with Mediocre Performance

 

On Wednesday (January 1st), US stock index futures were subdued, kicking off 2025 cautiously, as the Santa Rally mostly failed to occur in late December.

 

Specifically, fears of a decelerating Fed rate cut and uncertainty over incoming President Donald Trump's policies caused investors to lock in near-term profits. Meanwhile, trading volumes stayed light and are not expected to increase until next week due to the year-end holiday. Both pulled down market sentiment, largely preventing a market rally.

 

Separately, a vehicle attack in New Orleans that killed at least 15 people and an explosion of Tesla's $TSLA Cybertruck in Las Vegas further depressed the sentiment.

 

 

As of the US market's close on Dec. 31, the Standard & Poor's 500 index ended Tuesday's session down 0.43%. The Nasdaq Composite Index was down 0.90%. The Dow Jones Index was down 0.07%. Three indexes dropped for three consecutive days.

 

Throughout 2024, however, the Nasdaq rose 28.6%, gaining the most from the AI-driven rise in tech stocks. The S&P 500 added 23.3%. The Dow advanced 12.9%.

 

Looking ahead, the economic and international policies of Donald Trump who will take office as the American President later in January are significant.

 

Trump promised expansionary policies and high trade tariffs on major US trading partners such as China, Canada, and Mexico. Recently, investors have been cautious due to the uncertainty over Trump's policies. So, Wall Street saw some profit-taking after the November surge.

 

Also, investors are afraid that Trump's policies could keep inflation high for a long time, triggering the Fed to cut interest rates less often. Adding to this, the Fed recently signaled that the pace of rate cuts will slow in 2025.

 

The Fed's tighter monetary policy triggered a prolonged sell-off on Wall Street, causing stocks to fall at year-end.