The Fed’s Fuse: Waiting for the Rate Cut Spark

Fresh news and strategies for traders. SPY Trader episode #1452. The market is consolidating ahead of the pivotal Fed rate decision. We analyze the divergence caused by the JPMorgan drag versus persistent strength in AI names, offering a threepart strategy: maintain core Tech exposure (QQQ), hedge against uncertainty (AGG), and look for value opportunities in Financials (XLF) anticipating a 25 basis point rate cut.

Episode Transcript

(00:00):
Welcome back to Spy Trader , the podcast that helps you navigate the market while the rest of the world is still hitting snooze .
I'm your host , Barry Bullish , and it's 5 am on Wednesday , December 10th , 2025 , Pacific time .
We are live just hours away from the pivotal Federal Reserve interest rate decision .

(00:22):
The market is definitely exhibiting a ' waitandsee ' approach right now , sitting in a consolidation pattern , which means things are mostly flat but ready to explode one way or the other based on what the Fed says today .
The overall mood , however , remains one of cautious optimism , supported by longterm gains and improving investor sentiment , largely betting on a 25 basis point rate cut .

(00:49):
Drilling into the indexes , the S&P 500 is flat to slightly up , reflecting that holding pattern .
The techheavy Nasdaq Composite inched higher , moving up between 0.13% and 0.31% , thanks to those megacap AI names .
The Dow Jones Industrial Average , however , slipped slightly , down 0.3% to 0.38% , weighed down heavily by specific corporate news , which brings us to our key headlines .

(01:19):
The biggest drag came from the Financial sector , specifically JPMorgan , which sank 4.7% after forecasting 2026 expenses well above analyst expectations .
This is a classic example of companyspecific guidance overriding sector trends .
On the cautious consumer front , Home Depot lost 1.3% after issuing softer earnings growth guidance for 2026 , signaling potential caution in housingrelated spending .

(01:50):
However , it wasn't all gloom ; CVS Health climbed after raising its 2025 fullyear guidance , suggesting strength in managed care .
Meanwhile , in the critical tech space , we've seen Nvidia shares retreat slightly on reports that China might restrict domestic purchases of the USapproved H200 chip , even with a US surcharge .

(02:14):
We've also got crucial earnings reports due from Oracle and Broadcom this week , which will be vital for confirming the continued strength of corporate AI spending .
Now , for the analysis .
The market is clearly split .
Technology and Communication Services are leading the way , fueled by continued bullishness in AI and semiconductor companies , supporting ETFs like XLK .

(02:40):
Meanwhile , Financials ( XLF ) are lagging , hurt by the JPMorgan news and general uncertainty over how rate cuts will impact net interest margins .
The fundamental backdrop is dominated by the expectation that the Fed will cut rates by 25 basis points .
But remember , the labor market isn't totally soft ; job openings recently rose to approximately 7.67 million , signaling underlying strength .

(03:09):
The Fed Chair's postmeeting remarks will be closely scrutinized for the 2026 outlook .
So , how should we trade this tight range before the news hits ?
First , maintain exposure to the central AI theme , but diversify the risk .
Hold a core position in the broader technologyfocused ETF , the Invesco QQQ Trust , or QQQ , to capture the growth of the Nasdaq100 .

(03:33):
Watch Broadcom's earnings this week ; if its AI revenue is strong , it validates this entire thesis .
Second , hedge against uncertainty .
We know the mood is cautious , as even Utilities ( XLU ) are showing a slight gain .
For stability , incorporate a quality core fixedincome ETF like the iShares Core U.S.

(03:54):
Aggregate Bond ETF , or AGG , to add ballast to your portfolio ahead of any potential surprises .
Finally , look for value in underperforming sectors that have catalyst potential .
The pullback in Financials creates a potential valuebuying opportunity .
Consider an investment in the Financial Select Sector SPDR Fund , XLF .

(04:17):
If the expected rate cut materializes , and economic growth holds near 2% , as projected , the sector could rebound quickly .
That's it for this edition of Spy Trader .
Stay cautious , stay nimble , and we'll catch you on the next update !