Dow futures fall, Nasdaq ticks higher as Wall Street assesses Fed's 2025 rate path

Stock futures started a mixed week of short trading as investors considered the path of interest rates next year after the Fed suggested they would stay higher for longer.

Futures linked to the S&P 500 (ES=F) embrace the flat line, while those on the tech-heavy Nasdaq (NQ=F) it rose 0.3%. Dow Jones Industrial Average Futures (YM=F) lost 0.3%.

Wall Street is coming off an encouraging Friday but a depressing week – and ficklewith all three major averages up above 1% on Friday but down around 2% for the week. The Fed is playing the part of the Grinch, indicating that it would step back its pace of cuts next year, leading stocks to one of the worst days of the year on Wednesday.

On Friday, however, the Fed's preferred gauge of inflation, the Personal Consumption Expenditure index, showed further cooling in terms of inflation – if it is still sticky. Still, the lone dissenter from the Fed's move to cut last week she said she voted against cut rates because “there is more work to be done on inflation.”

For now, according to the CME FedWatch tool, investors are betting on the Fed holding rates steady next month. For his next meeting in March, bets are about 50-50 on a break versus a hold.

But this week's light schedule will give Wall Street some breathing space and a chance to digest and reflect as we head into 2025. Markets will close at 1 pm ET on Tuesday, followed by the Christmas holiday on Wednesday.