U.S. Treasury yields fell, the "Santa Claus rally" remains hindered, and Wells Fargo expects the Federal Reserve to cut interest rates only once next year!

According to Zhitong Finance APP, on the penultimate trading day of 2024, U.S. Treasury yields fell. The yield on the 10-year Treasury decreased by about 7 basis points to 4.547%, slightly below last week's multi-month high; the 2-year Treasury yield dropped 7 basis points to 4.254%. Treasury yields move inversely to prices, with each basis point equal to 0.01%. Investor focus at the end of the year includes the outlook for the U.S. economy and the direction of the Federal Reserve's monetary policy in 2025. Earlier this month, the Federal Reserve's meeting suggested that future rate cuts may be fewer than previously expected by the market. Brian Rehling, head of global fixed income strategy at Wells Fargo Investment Institute, pointed out that the Fed's rate-cutting cycle is nearing its end, with only one additional rate cut expected next year. This judgment is based on the current strong performance of the U.S. economy and persistently stubborn inflation. Despite the Fed having recently begun cutting rates, long-term rates have continued to rise, reflecting a diminished expectation for further central bank action. According to CME Group's FedWatch tool, the market currently anticipates the first rate cut may occur in May 2025. Economic data released on Monday showed that pending home sales in November reached an annual high, but the Chicago Purchasing Managers' Index (PMI) was only 36.9, below economists' expectations of 42.2. Additionally, the number of initial jobless claims slightly decreased as of December 21, but the number of continuing claims surged to the highest level since November 2021. All three major U.S. stock indices fell on Monday, with the S&P 500 and Nasdaq both down over 1%, indicating that the traditional "Santa Claus rally" may face challenges. Although the S&P 500 index rose strongly earlier this year, pushing valuations to high levels, the recent rise in Treasury yields has put pressure on the stock market, with the S&P 500 and Dow Jones facing their weakest monthly performance since April. David Morrison, senior market analyst at Trade Nation, stated that the high-yield environment could pose a strong resistance to the stock market, as investors may prefer the relatively safe returns of U.S. Treasuries over the more volatile stock market. Meanwhile, the market is closely monitoring the U.S. debt ceiling issue. Treasury Secretary Janet Yellen indicated that the Treasury may take "extraordinary measures" as early as January 14 to avoid a debt default, which could become a significant focus for the market in the coming weeks