Dow Jones futures fell by 0.11% during the European session on Wednesday, hovering around 48,700. Similarly, S&P 500 and Nasdaq 100 futures dropped by 0.10% and 0.09%, respectively, as trading slowed due to holiday breaks. On Tuesday, the S&P 500 hit a record high of 6,909.79, thanks to gains in tech stocks like Nvidia, Broadcom, and Amazon. However, US index futures slipped as traders considered possible Federal Reserve rate cuts in 2026.

Strong Economic Performance

US GDP grew by 4.3% annually between July and September, exceeding expectations. Additionally, the core PCE Price Index rose by 2.9%, matching predictions. Advisor Kevin Hassett stressed the importance of quicker rate cuts, despite the robust economic growth. The Dow Jones Industrial Average (DJIA) contains 30 major US stocks and is influenced by factors like company earnings, economic data, and Federal Reserve interest rates. Dow Theory analyzes DJIA and DJTA trends through three phases: accumulation, public participation, and distribution. You can trade the DJIA through ETFs, futures contracts, options, and mutual funds. Akhtar Faruqui, a Forex Analyst, focuses on trend analysis and financial dynamics in his market reports.

Holiday Trading Dynamics

This Christmas Eve, index futures are slightly down, a typical move after the S&P 500 just hit a new high. Trading volumes are low due to the holiday, so we shouldn’t overreact to these small declines. The overall trend remains strong following four consecutive winning days powered by tech stocks. Current economic data offers a mixed view. The economy is growing faster than expected, with a third-quarter GDP of 4.3%, and the November jobs report added 210,000 positions. Yet, despite this strength and core inflation at 2.9%, influential voices are calling for the Federal Reserve to cut rates. For derivative traders, this creates a unique situation. The CBOE Volatility Index (VIX) is low at around 13.5, making options relatively affordable. It might be a good time to buy protective puts to shield against a potential market pullback in January when trading volumes normalize. On the other hand, bullish traders could consider call options for more upside without large capital outlay. As we approach the final trading days of 2025, keep in mind the historical “Santa Claus Rally,” which has produced positive returns in seven of the last ten years. Looking ahead, the futures market is already factoring in next year, with the CME FedWatch Tool suggesting a 65% chance of at least one rate cut by June 2026. This implies that any short-term weakness could be seen as a buying opportunity. Create your live VT Markets account and start trading now.

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