It’s decision day! 25-bps rate cut or not? Analysts expect Fed Chair Jerome Powell to emphasize a slower pace of easing and data-dependence moving forward.

Market breadth? Still bleak—The S&P 500 just logged its 12th straight negative session, breaking a streak last seen in September 2001.

⚡ Closing Bell:

• Dow Jones: ⬇️ -0.6% to 43,449.9
• S&P 500: ⬇️ -0.4% to 6,050.6
• Nasdaq: ⬇️ -0.3% to 20,109.1 (retreating from Monday’s record close).
• Russell 2000: ⬇️ slumped harder, down -1.1%

Sector Highlights:

• ✅ Consumer Discretionary: The only S&P 500 sector in the green, lifted by Tesla (TSLA) ⬆️ +3.6%.
• ❌ Industrials & Financials: Worst-performing sectors of the day.
• ❌ Semiconductors: Broadcom’s ⬇️ -4.0% drop to $238.00 dragged the VanEck Semiconductor ETF (SMH) down ⬇️ -1.3%.

🔍 Speculative Frenzy:
The quantum computing theme is thriving, with Quantum Computing and Rigetti Computing taking center stage. More money traded hands in Quantum Computing (QUBT), Rigetti Computing (RGTI), and SoundHound AI (SOUN) than in Visa (V) ⬆️ +0.67%, Netflix (NFLX) ⬇️ -0.21%, Oracle (ORCL) ⬇️ -0.85%, or JPMorgan (JPM) ⬇️ -0.51%.

Economic Data:

• Retail Sales: Surged beyond expectations in November, driven by auto purchases.
• Industrial Production: Fell for a third consecutive month, though manufacturing edged back into growth territory.
• Homebuilder Confidence: Held steady in December, balanced between high costs and optimism for 2024 regulatory improvements.

Treasury yields:

• 10-Year Treasury Yield: ↔️ 4.40%
• 2-Year Yield: ↔️ 4.25%

❗ What’s Coming Up:
It’s rate decision day and markets await Powell’s remarks.

#TRUTH:
❗❗❗ “Life is not always a matter of holding good cards, but sometimes, playing a poor hand well.” ~ Jack London

Is the Fed Rethinking 2025?

A rate cut this week feels like a done deal, but the real question: Is the Fed scaling back its 2025 rate cut plans? The dot plot—where Fed officials map out their interest rate predictions—will tell the story.

Where We Stand:

• September’s dot plot forecast 4 rate cuts for 2025.
• Stubborn inflation and a resilient labor market now have Fed watchers calling for 2-3 cuts instead.

Inflation Update:

• November CPI: ⬆️ 2.7% (slightly above October’s 2.6%).
• Core inflation: Flat at 3.3%, holding steady for 4 months.
• Wholesale prices? Higher than expected.

Labor Market Resilience:

• Despite cooling demand, job growth remains steady, averaging 108K jobs/month over the last six months.
• No major signs of weakness—bad news for those hoping for rapid rate cuts.

Fed Chair Jerome Powell hinted at caution earlier this month, saying the economy’s surprising strength allows for a slower approach. Expect him to highlight progress on inflation but keep his options open.

The stakes are high: Is the Fed ready to ease up, or will it double down on its optimism for 2025?

Surprise:

November retail sales gave Wall Street an early holiday gift, rising +0.7%, beating expectations of +0.6%, and signaling that US consumers still have some spending power left in the tank.

The holiday shopping season is off to a strong start, driven by:

• Autos & Parts: 🚗 +2.4% month-over-month, leading the gains.
• Online Sales: 🛒 +1.8%, as e-commerce continues to thrive.
• Control Group: Steady at +0.4%, matching forecasts and showing broad-based consumer strength.

Behind the numbers:

• October’s retail sales were revised up to +0.5% (from +0.4%), painting a brighter picture for the fall.
• Excluding autos and gas, sales rose +0.2%, falling short of expectations for +0.4%.

Economists are impressed but cautious. Capital Economics sees “consumer resilience,” but warns slowing income growth and high credit costs could spoil 2025. Wells Fargo’s Tim Quinlan chimed in, saying tariffs could sneak in next year to dim the outlook.

Why It Matters:
Investors are keeping a close eye on consumer spending as the Federal Reserve prepares its next rate cut—expected to be 25 bps—today. While resilient sales are a welcome sign, they also suggest the Fed may tread cautiously on further rate reductions in 2025.

Move over, gold:

Bitcoin ETFs have officially flipped the script. On Dec. 16, net assets in U.S. Bitcoin ETFs surpassed gold funds for the first time, reaching $129 billion in AUM, compared to gold ETFs just shy of that mark, according to K33 Research.

The Breakdown:

• Bitcoin ETFs: Combined $130B (spot, futures, leveraged).
• Gold ETFs: Lagging at $128B.
• Even in spot-only terms, Bitcoin ETFs are quickly catching up: $120B BTC vs. $125B gold.

What’s Driving the Surge?

• Trump Effect: Optimism post-election brought $5B in inflows to Bitcoin ETFs.
• BlackRock’s IBIT: The leader among Bitcoin ETFs with $60B AUM, surpassing BlackRock’s own iShares Gold Trust in November.
• Debasement Trade: Rising geopolitical tensions and inflation fears have investors hedging their bets with both Bitcoin and gold.

The “unreal” reality:
After just 11 months since U.S. spot Bitcoin ETFs launched, the crypto giant is competing head-to-head with the “safe-haven” king. As K33’s Vetle Lund and Bloomberg’s Eric Balchunas put it, Bitcoin’s rise in the ETF landscape is nothing short of “unreal.”

Nissan + Honda = Japan’s Power Play?

Two of Japan’s automotive giants—Nissan an

d Honda—are in early merger talks to take on the global titan Toyota. If successful, the deal could reshape the auto landscape, combining forces to tackle EV dominance and the rapidly evolving industry.

The Big Picture:

• Nissan shares ⬆️ +24%, their biggest intraday jump ever, on merger rumors.
• Honda shares dipped ⬇️ -3.4%, as markets digest the potential tie-up.

What’s on the Table:

• A new holding company could unite Nissan, Honda, and possibly Mitsubishi, streamlining resources and operations.
• Combined sales in H1 2024? 4M vehicles globally—still shy of Toyota’s 5.2M, but a step closer.
• The move follows previous Honda-Nissan collaborations on EV batteries and software.

For Honda, the merger could bring much-needed scale and investment power for EV innovation. For Nissan, it’s a lifeline to address financial struggles and a daunting debt load.

The Road Ahead:
An announcement could come as soon as December 23, but talks are in early stages and could fall apart. Still, with Toyota’s ¥42.2T market cap towering over the combined Nissan-Honda valuation, the road to rivalry will be steep.

What’s Next:
Keep an eye on Toyota’s next move—it may double down on its own partnerships (think Subaru, Suzuki, and Mazda) to cement its dominance. Meanwhile, Nissan and Honda are betting that two engines are better than one.

No Room at the Office:

Amazon’s big return-to-office (RTO) push is running into a major snag—it doesn’t have enough office space. Workers in Atlanta, Houston, Nashville, and New York will keep their current hybrid setups past the January 2 deadline while Amazon scrambles to make room.

Mixed Signals:
Despite cutting back on hiring, Amazon CFO Brian Olsavsky admitted office staff is only “slightly” down year-over-year. Meanwhile, the company has been saving big bucks by slashing office space.

The Cost-Cutting Chronicles:

• $1.3 billion saved by breaking leases this year.
• HQ2’s “Helix” tower? Postponed indefinitely.
• HQ3 in NYC? Scrapped entirely after backlash.

Amazon’s belt-tightening is clashing with its RTO ambitions, leaving some workers off the hook (for now). But, for those enjoying the WFH life, this logistical hiccup might just be the holiday gift they didn’t know they needed.

Another Déjà vu:

GameStop ($31.18, ⬆️ 6.2%) just booked its highest close since June 6, when volatility halted trading after Keith Gill—aka Roaring Kitty—teased a livestream on why he still liked the stock. Back then, it marked the high-water point of Meme Mania 2.0 before a 60% tumble.

Now, déjà vu is in the air, but it’s the options market stealing the show.

Bullish Bets Are Everywhere:

• Put-to-call ratio: At a stunning 0.127, meaning nearly 8 bullish options are trading for every bearish one.
• A whale alert: A significant bullish position in call options will be in the money only if GameStop hits $125—a massive leap from current levels.
• Trading volumes: Stock activity is steady, but the real heat is in call options.

The surge in demand for GameStop call options mirrors the frenzy of earlier runs, but this time, the optimism is laser-focused on upside potential. With Roaring Kitty’s past legal troubles dismissed, could this be a redux of 2021’s meme-stock madness?

🧩 Movers:

• Spotlight ✅ / At the Bottom ❌
  • ✅ Teva (TEVA): ⬆️ +19.25%, smashing expectations with successful drug trials.
  • ✅ Pfizer (PFE): ⬆️ +4.67%, best S&P 500 performer with 2025 profit guidance.
  • ✅ Sanofi (SAN): ⬆️ +3.29%, buoyed by Teva’s breakthrough.
  • ✅ GameStop (GME): ⬆️ +6.3% to $31.18, its highest close since June, as options traders positioned for a mid-January spike.
  • ✅ Quantum Computing (QUBT): ⬆️ +51.4% to $18.88.
  • ✅ Rigetti Computing (RGTI): ⬆️ +32.3% to $11.39.
  • ❌ Amentum (AMTM): ⬇️ -9.55%, second-steepest S&P 500 decline.

Commodities Check: ✔️

• WTI Crude: ⬇️ -0.8% to $70.16 on weaker China demand.
• Gold: ⬇️ -0.3% to $2,661.30 per troy ounce.
• Silver: ⬇️ -0.2% to $31.00 per ounce.

The Dollar:

💱 Currency Moves:

• Dollar Index (DXY): ⬇️ -0.01% to 106.86
• Euro (EUR/USD): ⬇️ -0.2% to 1.098
• Dollar/Yen (USD/JPY): ⬆️ +0.4% to 149.8

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Disclaimer

This letter is not offering investment, trading, or investment advice nor is based on any individual portfolio or business operation. We are not a registered investment, stock nor commodity advisor. One should consult with their own registered advisor to discuss investment strategies that are appropriate for their business or personal goals, risk tolerance and financial situation. Information in this report and on any website is derived from a variety of source believed to be reliable however no representation is made that the information is accurate, complete or correct. These lessons, newsletter and site content is not intended nor shall not constitute or be construed as an offer or recommendation to “buy”, “sell”, “trade” or invest in any securities, commodities, futures, options or other asset referred to in said lessons, reports or newsletters. Rather, this research is intended to identify situations and circumstances that those in the trading community should be aware of to better help assess and improve their own risk management skills.