Wall Street Braces for Fed Rate Cut as Volatility Jumps and AI Mega-Cap Trade Takes Center Stage

The hard truths about building wealth👇

U.S. stocks slipped Monday at the close, with major indexes easing ahead of the Federal Reserve’s final policy meeting of 2025 and investors digesting fresh developments in big-tech AI plans and a high-stakes media takeover battle.

The Dow Jones Industrial Average fell 215.67 points, or 0.45%, to 47,739.3. The S&P 500 shed 23.89 points, or 0.35%, to 6,846.51, while the Nasdaq Composite edged down 32.22 points, or 0.14%, to 23,545.9. The small-cap Russell 2000 finished essentially flat, up 0.13 point, or 0.05%, at 250.90. The CBOE Volatility Index climbed to 16.94, a 9.94% jump on the day, underscoring choppier trading into the meeting.

In commodities and digital assets, front-month U.S. crude for January settled at $58.81, down 2.11%, while February gold futures slipped 0.45% to $4,223.80. Bitcoin traded at $90,666.23, off 0.90%, adding to the cautious tone across risk assets.

Deal drama added another thread to Monday’s narrative. Paramount Skydance Corp. unveiled a hostile $30-per-share cash bid for Warner Bros. Discovery Inc., valuing the company at $108.4 billion including debt and topping Netflix’s $27.75 cash-and-stock proposal focused only on select assets. Warner Bros. said it would “carefully review and consider” the new offer and expects to advise shareholders on the board’s recommendation within ten business days. “We’re really here to finish what we started,” Paramount Skydance CEO David Ellison told CNBC, adding, “We’re sitting on Wall Street, where cash is still king. We are offering shareholders $17.6 billion more cash than the deal they currently have signed up with Netflix,” and arguing that “Allowing the No. 1 streaming service to combine with the No. 3 streaming service is anticompetitive.”

The Fed’s two-day gathering, which begins Tuesday, is widely expected to produce a third straight 25-basis-point rate cut on Wednesday at 2 p.m. ET, bringing the federal funds rate to 3.50%–3.75%, according to an analysis from AINVEST. Futures markets place the odds of a move in the high-80% to 90% range, but pricing for 2026 remains cloudy, with the CME curve implying only one to three cuts next year.

The bigger question for traders is whether Chair Jerome Powell delivers what strategists are calling a “hawkish cut,” a reduction now accompanied by guidance that signals a lengthy pause. September’s Summary of Economic Projections mapped out a gentle glide path: three cuts in 2025, then just one each in 2026 and 2027, alongside 2026 forecasts for 1.8% real GDP growth, 4.4% unemployment and 2.6% inflation, with the funds rate at 3.4%.

Complicating that outlook is a “data fog,” as an extended government shutdown has delayed key labor releases even as private indicators hint at cooling in small businesses and cyclical sectors and consumer confidence has slumped. The Fed itself recently ended quantitative tightening as of December 1, even while judging that inflation remains “somewhat elevated.”

Amid the macro uncertainty, Apple remained a focal point for growth investors. Wedbush Securities lifted its Apple price target to $350 from $320, reiterating an Outperform rating and arguing that 2026 will be the year the company “actually enters the AI Revolution,” supported by solid iPhone 17 demand into year-end, including in China. The firm highlighted Apple’s recent AI shake-up, John Giannandrea stepping down as AI chief and Amar Subramanya, a veteran of Microsoft and Google’s DeepMind, joining as VP of AI under Craig Federighi—and estimated that AI monetization could add $75 to $100 per share over time.

With equities modestly lower, volatility higher and central-bank and corporate storylines competing for attention, investors head into Tuesday’s session focused squarely on how much more easing Powell can credibly signal and how soon a new Fed leadership might rewrite that script.