Good morning, investors. We’ve arrived at yet another Super Bowl for market-watchers with the Fed set to announce its policy decision today.

Investors have little doubt interest rates will come down this afternoon. But the language around the decision will determine what happens to asset prices.

The Fed is all but certain to lower interest rates today, though markets will react based on which version of the cut unfolds.

With the committee still divided between hawks and doves — that is, those who want higher rates versus lower rates — investors’ response will hinge on how Jerome Powell balances a contentious decision with incoming data and an up-in-the-air outlook. 

“We think [Powell] will attempt to balance the expected rate cut with a hawkish stance at the press conference, just as he did in October,” Bank of America strategists wrote in a note to clients.

In their view, a hawkish rate cut would likely lean on changes to the Summary of Economic Projections, or the dot plot.

The Fed could signal fewer cuts are coming in the year ahead, and raise the bar for additional easing. 

BofA projects the dot plot to show two cuts for 2026, but not necessarily an outright easing cycle. This tone of outlook would frame December as a one-off adjustment, rather than the start of a new easy-money regime.

A dovish rate cut, meanwhile, would be the one to push asset prices higher. 

This, BofA strategists said, would stem from Powell’s tone in the press conference rather than any specific changes in votes. 

Should Powell avoid mentioning policy is restrictive, or if he refrains from outlining the case for further cuts, markets could begin to price in another cut as soon as January. 

Stephen Miran is expected to make a dovish dissent, likely in favor of a 50 basis point cut.

To be sure, Powell’s credibility poses a wrinkle in the Fed’s strategy.

His hawkish warnings earlier in the year spooked markets at the time, though they ultimately didn’t shift expectations.    

That suggests some investors may doubt any hawkish signal Powell may adopt, particularly with so much data across the labor market and inflation due before the January meeting.

The takeaway here is that markets aren’t wondering whether the Fed will lower rates.

Look for signs as to whether it’s the first of many or not.

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🤖 Nvidia’s chips will see a security review before going to China. The chips will travel from Taiwan, where they are manufactured, to the US for a review before going to China, an unusual roundabout process. (WSJ)

📊 Oracle’s earnings could shake up the AI trade. Analysts expect 15% sales growth driven by cloud and AI software, though an earnings miss could drag the entire Nasdaq Composite lower. Investors will be watching for updates on its contracts with OpenAI. (Barron’s)

🏦 President Trump could see more leeway to fire government officials. The Supreme Court appears inclined to expand executive power to dismiss heads of regulatory agencies, according to a new report. That said, concerns remain about Fed independence. (WSJ)

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🗓 December 10, 2016: Russia led 11 non-OPEC oil producers to sign a pact to create the OPEC+, coordinating oil-production cuts and helping to end the post-2014 oil bust.

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📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

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