S&P 500 Falls as Fed Officials Get Ready for Battle Royale Over Rate Cuts

The S&P 500 (Index: SPX) experienced a lot of intraday volatility in the trading week ending on Friday, 21 November 2025. By the close of the week’s trading, the index was down 1.95% from its previous week’s close.

Two factors combined to put the market through big swings during the week that was. The AI tech stocks that have helped power the S&P 500 to record highs during 2025 got a big boost from Nvidia (NASDAQ: NVDA) after the close of trading on Wednesday, 19 November 2025, when the company announced its cloud GPU products sold out, affirming the megacap’s outlook going into 2026.

The market’s positive reaction to that news was tempered on Thursday however, as a number of Federal Reserve officials staked out positions against continuing the Fed’s recent rate cuts in December 2025. That information sent stock prices down to their lowest level since 10 September 2025, which was partially reversed on Friday when the Fed’s second-highest ranking official signaled a rate cut “in the near term” would be likely.

The response by investors to the prospect a “near term” rate cut is remarkable. The CME Group’s FedWatch Tool rose to indicate a 71% probability of a quarter point rate cut on 10 December (2025-Q4), up from just 44% a week ago, with virtually all of that change taking place on Friday, 21 November 2025. Meanwhile, the S&P 500 rose nearly one percent on the day to end the trading week at 6,602.99.

Looking further forward, the FedWatch tool gives better than even odds for additional quarter point rate cuts in 2026, coming on 29 April (2026-Q2), 29 July (2026-Q3), and 9 December (2026-Q4). The potential timing of all these projected rate cuts remains very fluid with substantial changes in expectations from week to week.

For the latest update of the alternative futures chart, we’ve added a new short-term redzone forecast range to compensate for the echo of historic volatility in stock prices in the dividend futures-based model. The echo effect arises as a result of the model’s use of historic stock prices as the base reference points from which its projections of future stock prices are determined. The new redzone forecast range assumes investors will remain focused on the current quarter of 2025-Q4 in setting stock prices during the period it runs.

Speaking of the echo effect, the chart also shows we’ll have another, longer period coming up in which the model’s projections will be similarly affected, though for that period, we anticipate the model’s projections will undershoot the trajectory of stock prices.

We also likely won’t know how investors will reset their forward-looking investment time horizon after the Fed’s 10 December 2025 meeting. They will shift their attention to a more distant quarter in the future, but the open question that remains to be answered is which one?

Sorting that out depends on the context of the random onset of new information investors will absorb in the weeks ahead. Until those make themselves known, here are the past week’s market moving headlines.

Monday, 17 November 2025

• Signs and portents for the U.S. economy:

• Oil prices ease after loadings resume at Russian export hub
• US construction spending rebounds in August
• China deal buys US time to build critical minerals supply chain

Fed minions keep sending mixed messages on December 2025 rate cut probability:

• Fed needs to move slowly with further rate cuts, Jefferson says
• Fed’s Waller says weak job market justifies rate cut in December

Bigger trouble developing in Japan, BOJ minions get multiple reasons to hold off on rate hike plans:

• Japan’s economy contracts for first time in six quarters on tariff hit
• Japan government panel member Kataoka calls for $149 billion stimulus package
• Threats Of Sanctions, Economic Warfare, As Japan-China Relations Sink To Decades Low

ECB minions say Eurozone: monetary policy is appropriate:

• ECB’s Sleijpen: risks are balanced, policy is appropriate

Wall Street extends losses as investors await Nvidia results, other Q3 earnings

• Wall Street indexes end lower; investors brace for jobs data, Nvidia results

Tuesday, 18 November 2025

• Signs and portents for the U.S. economy:

• Oil rises on Russia sanctions, interviews for next US Fed chair

• Global oil refining profits surge and may stay strong

US factory orders rebound as expected in August

Exclusive: China snaps up US soybeans after pledge to Trump, but at high price, traders say

Fed minions say they want more economic data from the government:

• Fed’s Barkin looks forward to more economic clarity as data flow resumes

BOJ minions looking to get “smooth landing” for Japan’s inflation, Japan’s new PM looking to get monetary policy support from BOJ minions:

• BOJ chief tells Takaichi central bank seeking smooth landing towards price goal
• Japan PM Takaichi to meet BOJ Governor Ueda on Tuesday, PM office says

Bigger trouble developing in Japan:

• Japan finance minister says ‘alarmed’ over yen’s volatility
• China threatens more countermeasures over Japan PM’s Taiwan remarks

• Japan warns citizens in China about safety as diplomatic crisis deepens

ECB minions suddenly really worried about Eurozone banks going under:

• Europe’s banks face ‘unprecedentedly high’ risk of shocks, ECB warns

• ECB’s top supervisor seeks new powers to override bank capital barriers
• Euro zone banks are preparing well for lower liquidity

Wall Street finished the day firmly lower despite afternoon efforts to pare higher

Wednesday, 19 November 2025

• Signs and portents for the U.S. economy:

• US trade deficit narrows sharply in August in boost to third-quarter GDP
• Oil falls on signs of renewed push to end Russia-Ukraine war
• Beijing Jumps Back Into US Soybean Market, Snaps Up 20 Cargo Loads After Abrupt Pause

Fed minions less likely to cut rates in December because shutdown blocked government from collecting jobs data in October, Fed minutes reveal Fed minions all over the map for rate cuts, one minions proposes Fed balance sheet relief:

• December Fed rate cut odds slide after cancellation of October jobs report

• US canceling October’s employment report after shutdown prevented data collection

Fed cut rates even as many of its policymakers worried about inflation, minutes show

• Fed minutes show support for ending quantitative tightening
• What Fed cut? US repo rates still high as liquidity tightens into year-end

Fed’s Miran calls for exempting Treasuries from bank leverage rule

• Easing regulations could lead to smaller Fed balance sheet, Miran says

Trump looking to replace Fed Chair Powell:

• Trump says his administration has started interviews for next Fed chair

• Trump again criticizes Fed’s Powell, says ‘I’d love to fire his ass’

BOJ minions really starting to get worried as much bigger trouble develops in Japan:

• Japan policymakers agree to watch market with ‘strong sense of urgency’, yen weakens

• Japanese yen’s safe-haven illusion shatters

Japan Bond Yields Soar To Record, Slamming Door On Stimulus Just As Economy Implodes Amid Escalating China Clash

ECB minions thinking about going on vacation all next year:

• ECB set to hold rates through 2026 on steady economic outlook

Wall Street finished higher despite a volatile topsy turvy trading session

• Wall Street indexes end rocky session higher; Nvidia gains after hours

• Nvidia pops as AI strength buoys Q3 results, guidance; Huang says cloud GPUs ‘sold out’
• Nvidia’s strong forecast calms AI bubble jitters, for now

Thursday, 20 November 2025

• Signs and portents for the U.S. economy:

• US posts solid job gains in September but unemployment rate rises to 4.4%
• US existing home sales increase in October
• Oil edges higher on inventory draw and equities rally
• Trump signs order to remove tariffs from Brazilian beef, coffee

Fed minions divided on more rate cuts:

• Fed’s Hammack warns more rate cuts court financial stability risks
• Fed’s Paulson is ‘cautiously’ approaching December rate decision, she says
• Fed’s Goolsbee uneasy about rate cuts, says nothing wrong with dissenting

Bigger trouble, stimulus developing in China:

• China steel output slumps as iron ore imports head for record
• China expected to keep rates steady for sixth month as PBOC turns less dovish

BOJ minions plans to hike rates again in question:

• BOJ set to hike interest rates in December, but decision on knife-edge
• Japan policymakers agree to watch market with ‘strong sense of urgency’, yen weakens

ECB minions wants to see outlook get really bad to justify next Eurozone rate cut:

• ECB’s Makhlouf says material outlook change is needed for rate cut

Nasdaq slides more than 2%, marking a stunning reversal from gains of more than 2%

• Volatility spikes to a one month high as market sentiment shifts sour
• AI borrowing binge prompts investors to back away from corporate bonds

Friday, 21 November 2025

• Signs and portents for the U.S. economy:

• U.S. job growth in 2025 weakest in 15 years, excluding pandemic’s 2020
• US manufacturing slows in November as high prices curb demand
• Oil prices settle down at lowest in a month as US seeks Russia-Ukraine peace deal

• Shale rigs idle, layoffs rise as $60 oil tests resilience of Permian

China’s largest US soybean buy in 2 years buoys prices, triggers sales by struggling farmers

High ranking Fed minion signals rate cut “in the near term” while others take every position imaginable, one minion says AI not like Dot-Com bubble:

• December rate cut odds swing back up sharply after NY Fed’s Williams sees room for easing

• Fed cut odds rise on Williams’ comments, though policy hawks remain adamant

Fed’s Collins leans against December rate cut in CNBC interview

Fed’s Logan calls for holding rates steady ‘for a time’

Fed’s Miran would back 25-bp rate cut if he were ‘marginal vote’ – BBG TV

Fed’s Jefferson: AI-related stock gains unlikely to be dot-com boom replay

Bigger stimulus developing in China:

• China Prepares New Property Stimulus Package As Housing Crisis Enters Year Six

Inflation data pushes BOJ minions closer to hiking Japan’s interest rates as they also worry about yen possibly collapsing:

• Japan’s core inflation accelerates in October, stays above BOJ target
• BOJ nearing decision to raise rates, board member Masu says -Nikkei

• Bank of Japan signals chance of December rate hike as yen slides

Japan ramps up warning of yen intervention, chance of near-term rate hike

• All Hell Breaks Loose In Japan As Yen, Bonds Crash Ahead Of Gigantic, Debt-Busting Stimulus

Wall Street ended notably higher following the previous session’s violent swings

• Wall Street indexes jump as rate cut bets increase but suffer losses for week

• ‘In the near term’: Four words have Wall Street rebounding more than 1%

Lilly becomes first drugmaker to hit $1 trillion valuation on weight-loss demand

The Atlanta Fed’s GDPNow tool projection of real GDP growth in the U.S. during the recently ended 2025-Q3 increased from +4.0% to +4.2% as several delayed economic data reports started to come in following the end of the Senate Democrats’ shutdown. The BEA’s official estimates of GDP for 2025-Q3 will likely be delayed into December 2025 given the upcoming holiday calendar.

With the upcoming Thanksgiving holiday, we’re anticipating a low volume of news coming out of the U.S. in the week ahead. That means much of the market-moving news will be coming from outside the U.S., where we anticipate paying a lot of attention to developments in both China and especially Japan.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of Federal Reserve officials dressed as professional wrestlers who are fighting about whether to cut interest rates or not”.