Wall Street Braces for a Tumultuous Tuesday: Economy, Jobs, and Fed Policy in Focus

Investors brace for a muted Wall Street open amid news of a cooling U.S. economy and expectations for Federal Reserve policy easing in 2024, following data showing a rebounding labor market post-government shutdown. Small caps and blue-chip stocks gain, while tech stocks dip on Fed and valuation concerns.

Wall Street was set for a subdued start on Tuesday as investors assessed fresh data indicating a slowdown in the U.S. economy, which heightened expectations of further Federal Reserve policy easing next year. Investor sentiment briefly turned positive following a Labor Department report revealing job growth recovery in November, after an October decline due to spending cuts.

The November unemployment rate stood at 4.6%, signaling a weakening job market amid President Donald Trump's contentious trade policies. Peter Andersen of Andersen Capital Management noted that a rising unemployment rate stirs anticipation for additional rate cuts but warned against seeing this as a definitive trend.

Recent data provided more clarity to investors about the labor market conditions, which have been uncertain due to a prolonged government shutdown. As the central bank cut interest rates last week acknowledging job market weakness, investors are now projecting at least 58 basis points of rate reductions next year, surpassing the 25 bps indicated by the Fed last week. The focus on Federal Reserve leadership is creating added distraction, potentially stalling major monetary policy decisions.

(With inputs from agencies.)