Stocks started a short trading week mixed as investors considered the path of interest rates next year after the Fed hinted they would stay higher for longer.

The S&P 500 (^GSPC) fell more than 0.1%, while the tech-heavy Nasdaq (^IXIC) rose slightly. The Dow Jones Industrial Average (^DJI) fell 0.4%.

Wall Street is coming off an upbeat Friday but a downbeat — and volatile — week, with all three major averages up above 1% Friday but down around 2% for the week. The Fed is playing the part of the Grinch, signaling that it would step back its pace of cutting next year, leading stocks to one of the worst days of the year on Wednesday.

On Friday, however, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, showed further cooling on the inflation front — if still some stickiness. Still, the lone dissenter of the Fed’s move to cut last week said she voted against cutting rates because “there is more work to do on inflation.”

For now, according to the CME FedWatch tool, investors are betting on the Fed holding rates steady next month. For its subsequent meeting in March, bets are about 50-50 on a cut vs. a hold.

But this week’s light schedule will provide a bit of a breather and a chance for Wall Street to digest and reflect heading into 2025. Markets will close at 1 p.m. ET on Tuesday, followed by Wednesday’s Christmas holiday.

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