The Federal Reserve is widely expected to raise interest rates by a quarter of a percentage point today, but may cut the number of hikes it anticipates next year in the face of market volatility, a collapse in oil prices, and cooling trade activity. Complicating matters further, President Trump again warned the central bank that it must tread carefully in order not to "make yet another mistake." The rate hike would be the fourth this year and the ninth since the Fed began its current tightening cycle in December 2015.

Economy

Italy has reached a new budget deal with the European Commission, avoiding an EU disciplinary procedure and resolving a dispute that had vexed financial markets for months. If confirmed, the deal could help restore investors' confidence in Italian bonds, reducing Rome's borrowing costs and limiting the losses domestic banks have suffered since this summer.

It's Europe's first government collapse over the U.N. migration deal signed in Marrakesh last week. Belgian Prime Minister Charles Michel has offered his resignation just days after losing the backing of the nationalist New Flemish Alliance, one of his main coalition partners. However, with only five months to go until planned legislative elections in May, it was not immediately clear whether King Philippe will accept Michel's departure.

As the battle continues over border wall funding and a government shutdown, the U.S. pledged $5.8B in aid and investment for strengthening economic development in Central America, and another $4.8B in development aid for southern Mexico. "I have a dream that I want to see become a reality... that nobody will want to go work in the United States anymore," newly inaugurated Mexican President Andres Manuel Lopez Obrador said before the announcement.

Japan's export growth slowed to a crawl in November as shipments to the U.S. and China weakened sharply. The value of exports rose 0.1% from a year earlier, as a Sino-U.S. trade war weighed on the world's third-largest economy. There's some good news, however, as U.S. Treasury Secretary Steven Mnuchin confirmed plans to hold trade talks with Beijing in January.

As stocks move to new lows, it's an all-time record year for U.S. corporate stock buybacks. About $800B of stock has already been bought back amid total announcements of $1.1T. The trend is likely to continue into 2019, assuming that companies continue to generate significant free cash flow and that executives believe reducing share count and boosting EPS is more valuable than reinvesting profits.

Stocks

GlaxoSmithKline and Pfizer are combining their consumer health businesses in a joint venture with sales of $12.7B, majority owned by the British company. The transaction is expected to deliver $650M in peak cost synergies and to be slightly accretive for Pfizer (NYSE:PFE). It will also pave the way for a breakup of GlaxoSmithKline (NYSE:GSK), which intends to split into two separate businesses - one focused on consumer and one on pharma and vaccines. GSK +5.8%; PFE +1.2% premarket.

After weeks of uncertainty, Federal Judge Richard Leon said he's open to approving Aetna's (NYSE:AET) acquisition by CVS after the latter alleviated concerns by offering constructive measures on pricing and sensitive information. An outside monitor would also be brought in to ensure the company lives up to the commitments. Though Leon can't tank the deal on his own, he can conclude the DOJ's solution wasn't far-reaching enough to protect consumers.

Indian drug inspectors have seized samples of Johnson & Johnson’s (NYSE:JNJ) baby powder from a plant in a northern state, according to the Mint business daily, following a report the company knew for decades that cancer-causing asbestos lurked in the product. J&J has called the story "one-sided, false and inflammatory" and labelled it "an absurd conspiracy theory." JNJ -0.2% premarket.

Diego Piacentini, one of the most senior executives at Amazon (NASDAQ:AMZN) who had previously led its international business, has left the company after going on a two-year leave to work with the Italian government. His departure is particularly notable given that he's the second person to leave this year out of Amazon's "S-Team,” a tight-knit group of senior leaders that sees very little turnover.

As a result of store closures announced two months ago, Sears Holdings (OTCPK:SHLDQ) is expecting to incur charges of $443M in the next two quarters. That includes $81M in markdowns and severance costs, as well as $335M in lease termination costs. Sears Chairman Eddie Lampert made a $4.6B offer to buy the U.S. retailer earlier this month, which called for about 500 Sears stores to remain open.

Shares of SoftBank Corp. opened down 6.4% at ¥1,404 in its debut on the Tokyo Stock Exchange, but extended declines to close 14.5% lower. Investor appetite for Japan's largest ever IPO was hurt by a recent service outage at the telecoms operator, worries over its exposure to China's Huawei, and concerns over market saturation. The company is the telecoms unit of billionaire CEO Masayoshi Son's SoftBank Group (OTCPK:SFTBY).

The Senate has passed a bill to overhaul criminal sentencing guidelines in an 87-12 vote. The measure would curtail jail sentences for some nonviolent offenders, help ex-convicts adjust to life after release, and address disparities between crack and powder cocaine offenses. Judges would also get more discretion to set sentences for people charged with low-level drug crimes who cooperate with police. Related: GEO, CXW

While the Trump administration has proposed weakening the requirements, Exxon Mobil (NYSE:XOM) has sent a letter to the EPA in support of methane gas emission rules put in place under the Obama administration, Reuters reports. Methane accounts for 10% of U.S. greenhouse gas emissions but has more than 80 times the heat-trapping potential of carbon dioxide in the first 20 years after it escapes into the atmosphere.

Following petitions from the car industry, the NHTSA has issued a final regulation streamlining the review process for self-driving vehicles and whether automakers can deploy vehicles without controls like brakes or steering wheels. It comes as UBER received approval from Pennsylvania to resume self-driving car testing on public roads, nine months after it suspended the program following a deadly accident in Arizona.

Future of travel? With a Tesla Model X (NASDAQ:TSLA) zipping through a Boring Company tunnel Tuesday night, Elon Musk took the wraps off his vision of a high-speed system he believes could revolutionize how commuters get around cities. Modified with a set of guide wheels, cars can speed along a track like a kind of rail-guided train. In June, the Boring Co. signed a deal to develop high-speed transit tunnels between Chicago's business district and O'Hare Airport.

Tuesday's Key Earnings

FedEx (NYSE:FDX) -6% AH slashing its 2019 forecast.
Micron (NASDAQ:MU) -9% AH on downside guidance, capex cut.

Today's Markets

In Asia, Japan -0.6%. Hong Kong +0.2%. China -1.1%. India +0.4%.
In Europe, at midday, London +0.9%. Paris +0.6%. Frankfurt +0.6%.
Futures at 6:20, Dow +0.8%. S&P +0.8%. Nasdaq +0.8%. Crude -0.3% to $46.45. Gold -0.1% to $1252. Bitcoin +10% to $3816.
Ten-year Treasury Yield flat at 2.82%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Current Account
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:00 PM FOMC Forecast
2:00 PM Chairman Press Conference