Fed Showdown Looms With Stocks Near Records: Key Risks to Watch This Week

• Fed’s growing split over an interest-rate cut is coming to a head, putting next week’s meeting in rare territory and squarely in investors’ sights. Five of 12 FOMC voters have signaled opposition or doubt about more easing, even as three Fed governors back a cut, a level of division not seen since 2019 and only nine times since 1990. Those potential dissents, and what Chair Jerome Powell says about the path ahead, will be under intense scrutiny at the Tuesday-Wednesday meeting as markets parse both policy direction and the Fed’s internal fault lines.
• Friday’s Personal Consumption Expenditures () report, showing further cooling in September inflation, has reinforced expectations for a rate cut, while U.S. consumer sentiment also improved in December.
• On the corporate front, Wednesday is in the spotlight with earnings from and , followed by headline results from and on Thursday.

CME FedWatch USD Probabilities:

According to the CME FedWatch Tool, markets now assign an 89.4% probability to a quarter-point rate cut at this week’s Fed meeting. The central bank last trimmed its policy rate on October 29, to 3.75%-4.00% from 4.00%-4.25%, marking a second straight 25-basis-point reduction this year. But Powell rattled markets when he cautioned that a December cut was “not a foregone conclusion,” prompting stocks to give back gains after many investors had treated another move lower in rates as virtually guaranteed.

Corporate Earnings

• Earlier in the week, Tuesday (12/9) brings earnings from , , Campbell’s (NASDAQ:CPB), Casey’s General Stores, Ferguson (NYSE:FERG), and .
• A handful of mega caps will take center stage. Adobe (NASDAQ:ADBE) and Oracle (NYSE:ORCL) report after Wednesday’s close, followed by Broadcom (NASDAQ:AVGO) and Costco (NASDAQ:COST) on Thursday.

Oracle (ORCL) reports fiscal second-quarter results on Wednesday, with shares down nearly 30% from their September record. The print will give Oracle a chance to address investor concerns over its aggressive AI push. The enterprise tech giant is sharply ramping up capex to become a leading AI cloud provider, anchored by a $300 billion deal with OpenAI—an agreement that advances its ambitions but also raises questions about the risks of committing so heavily to a single customer.

Wall Street is looking for Broadcom to deliver year-over-year earnings growth on higher revenue for the quarter ended October 2025. While that consensus view helps frame expectations, the key driver for the stock in the near term will be how the actual results stack up against those estimates.

Analysts expect Costco to post year-over-year earnings growth on higher revenue for the quarter ended November 2025, but the key swing factor for the stock will be how results measure up against those estimates. Consensus calls for earnings to rise 9.2% next year, from $18.03 to $19.69 per share.

The company has already reported solid momentum, with quarterly revenue up 8.1% year over year to $86.16 billion, net income climbing more than 11% to $2.61 billion, and paid memberships increasing 6.3% to 81 million.

Investors are watching the Fed’s 2026 policy projections especially any signal on further rate cuts to assess the odds of a year-end “Santa Claus rally” as December has historically been a seasonally strong period for stocks, with gains often extending into the start of the new year.

Outlook: Early Look at Q4 Earnings

Fourth-quarter earnings season is approaching quickly. S&P Capital expects S&P 500 earnings to grow 6.7% year over year for the quarter, a slowdown from the 15% gain in Q3, with the information-technology sector leading the way at an expected 22.5% increase.

For the full year, S&P Global projects 11% earnings growth for S&P 500, followed by gains of 13.4% in 2026 and 14.6% in 2027. Earnings for the S&P MidCap 400 are forecast to rise 0.9% this year and 18.7% in 2026, while the S&P SmallCap 600 is expected to post growth of 10.1% and 17.2%, respectively.

Technical Analysis:

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