Fed’s decision, TSMC sales, bitcoin – what’s moving markets

Investing.com — Wall Street is seen edged higher Friday, continuing the post-election rally, helped by the Federal Reserve’s decision to cut interest rates. Bitcoin trades just below record levels, while TSMC, the world’s chipmaking giant, shows signs of sales growth slowing.  

1. Fed cuts, and signals more easing ahead

The Federal Reserve eased monetary policy at the conclusion of its latest policy-setting meeting on Thursday, as expected, and signaled the likelihood of further cuts ahead.

The US central bank lowered the benchmark overnight interest rate by 25 basis points to the 4.50%-4.75% range, the second reduction in a row, as policymakers continued to normalize monetary policy amid cooling inflation pressures.

In his press conference after the decision, Fed Chair Jerome Powell indicated that the economy could perform better next year than previously thought, and that inflation remains on a path back to the 2% target. 

This has resulted in traders pricing in another 25-basis-point rate cut next month, while the futures on the federal funds rate also implied another 67 bps of reductions for 2025.

Whether Powell remains in his role to oversee cuts next year remains to be seen given his fractious relationship with incoming president Donald Trump.

Trump appointed Powell in 2018, but frequently attacked the Fed chief during his first term in office for the central bank’s policy choices.

Powell was asked on Thursday if he’d exit central bank leadership if asked by Trump, said he would refuse to leave office early, adding he cannot be legally removed anyway.

2. Futures edge higher; strong weekly gains likely

US stock futures edged higher Tuesday, as investors on Wall Street digested the latest interest rate cut by the Federal Reserve, looking to continue the substantial post-election rally.

By 03:35 ET (08:35 GMT), the Dow futures contract was 43 points, or 0.1%, higher, S&P 500 futures climbed 6 points, or 0.1%, and Nasdaq 100 futures rose by 15 points, or 0.1%.

All three main indices hit intraday record highs during the previous session, continuing the market rally in the wake of President-elect Donald Trump’s victory, during which the Dow Jones Industrial Average and S&P 500 rose to their best days since November 2022.

Also helping the tone was the Fed’s decision to cut interest rates once more, while signaling that more reductions were likely as inflation appeared to be on track to the 2% target.

All three indices are on pace for strong weekly gains, with the S&P 500 and the DJIA higher by around 4%, while the Nasdaq was the outperformer, gaining 5.6% through Thursday’s close.

3. TSMC growth slowing?

Taiwan Semiconductor Manufacturing (NYSE:TSM) reported healthy sales in October, but sales growth is slowing, suggesting demand could be easing.

TSMC’s October revenue was T$314.24 billion ($9.80 billion), up 24.8% from the prior month and up 29.2% from October 2023. 

But the year-on-year figure slowed substantially from the nearly 40% growth seen in the prior month. 

TSMC, the world’s biggest contract chipmaker, clocked stellar earnings in the September quarter, as demand from the artificial intelligence sector for its advanced chips remained strong. The firm also flagged an improved outlook for the coming year from robust AI demand.

But TSMC also warned that chip demand from other sectors, especially personal computers, smartphones and consumer electronics, was weakening, with little signs of improvement. 

The firm is a key component of the chipmaking supply chain, and is a major supplier to U.S. tech giants such as Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL).

4. Bitcoin looks to new highs 

Bitcoin, the world’s most popular cryptocurrency, rose Friday, remaining close to the record highs hit this week in the wake of Donald Trump’s victory in the 2024 presidential election.

At 03:35 ET (08:35 GMT), Bitcoin rose 1% to $75,852.0, not far removed from the record high of $76,837.8 seen on Thursday.

The digital currency rallied strongly following Trump’s win, as markets bet that Trump will roll out more crypto-friendly regulations, as promised by his campaign. 

Trump had vowed to make the U.S. the “crypto capital” of the world, with investors betting that his policies would give Bitcoin more legitimacy as an investment vehicle, boosting its adoption by institutional investors. 

Further gains look likely, as Bitcoin’s price is in a critical phase of its bull market cycle, according to analyst Peter Brandt, with the key levels to watch as the cryptocurrency expected to be between $130,000 and $150,000 by late 2024.

5. Crude set for strong weekly gains

Crude prices fell Friday, but were still on course for hefty weekly gains, helped by a group of top producers delaying plans to increase production, as well as the prospect of more supply disruptions.

By 03:35 ET, the U.S. crude futures (WTI) dropped 1.2% to $71.50 a barrel, while the Brent contract fell 1% to $74.89 a barrel.

For the week, both contracts are set to gain around 3%.

The market was supported this week by the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, stating that it will delay plans to begin increasing production from December, as well as  expected actions by the incoming Trump administration, such as tighter sanctions on Iran and Venezuela.

Caution over Hurricane Rafael also buoyed oil prices this week, but the storm, which has caused around 400,000 barrels per day of US crude oil production to be shut, is now expected to move away from the critical areas over the weekend.