OP Wire 12/20 (OP – Lite)

By Steve

Wall Street Trends Lower Ahead of Key Inflation Data

Good morning, OP Lifers! Wall Street is poised for a lower open this Friday as investors brace for critical economic data, political uncertainty, and renewed trade tensions. Let’s break it all down:

1. Core PCE Index Looms Large

Today, all eyes are on the Core Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge. The November core PCE index is expected to show a 2.9% annual rise, slightly higher than October’s 2.8%, with a monthly increase of 0.2%.

The Fed has shifted to a more hawkish tone recently, cutting its forecast for 2025 rate reductions from four to two. This means fewer rate cuts—or none—could be on the table next year. A hotter-than-expected PCE figure could intensify market volatility.

Key context:

Consumer prices rose at their fastest pace in seven months during November.
Fed concerns include inflationary risks from potential trade and tax policies under the new Trump administration.

2. Futures Slip Amid Shutdown Fears

US futures are trading lower this morning:

Dow: -145 points (-0.4%)
S&P 500: -27 points (-0.5%)
Nasdaq 100: -165 points (-0.8%)

Sentiment is being dragged down by the looming government shutdown, set to begin tonight unless lawmakers reach a deal. The failure of a Trump-backed funding measure has heightened fears of economic disruption, with an estimated loss of 0.15% GDP growth for each week of shutdown.

The major indices are on track for sharp weekly losses:

S&P 500 & Dow Jones: -3% week-to-date
Nasdaq Composite: -2%

Keep an eye on the University of Michigan consumer sentiment index, as well as earnings reports from FedEx (FDX)and Nike (NKE) today.

3. US Government Shutdown Draws Near

A partial government shutdown is closer to reality after the House failed to pass a new funding bill. This would impact over 2 million federal workers starting midnight tonight, with potential ripple effects across the economy.

Goldman Sachs projects a swift rebound once the government reopens, but the short-term impact could weigh on sentiment and growth.

4. Trump Threatens EU with Tariffs

Trade tensions are back in the spotlight as Donald Trump warns the European Union of potential sweeping tariffs unless it addresses its trade deficit with the US by increasing purchases of American oil and gas.

Quick stats:

The EU accounted for 19.7% of US exports in 2023.
The US-EU trade deficit stood at $131.3 billion in 2022.

A trade war would create further uncertainty, adding pressure to global markets.

5. Oil Heads for Weekly Losses

Crude prices are on track for steep weekly losses as a stronger dollar and demand concerns weigh:

WTI: Down 2.3% to $68.97/barrel
Brent: Down 0.6% to $72.47/barrel

Key drivers include:

A stronger dollar, which makes oil more expensive for non-dollar buyers.
Hawkish Fed policies dampening growth and trimming demand.
Limited stimulus details from China and signs of cooling US fuel demand.

Yesterday’s Action Recap

Hope everyone enjoyed the chat play yesterday! The setup paid HUGE—I personally took 80%, but it kept climbing even after I exited. The live stream with Tracks was awesome as always. Don’t miss the next one!

That’s it for today’s premarket update. Stay sharp, trade smart, and as always—Stack Your Gains!

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