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Stock Market News: Nasdaq Composite Plummets As Fed Turns Hawkish

Eric Bleeker

Published: December 18, 2024 11:27 am

Last Updated: December 18, 2024 3:42 pm

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Nasdaq Now Down More than 3%

3:38 pm

Well, that escalated quickly. After markets were initially fairly muted on the Federal Reserve cutting rates by 25 basis points, selling accelerated during Jerome Powell’s conference call.

The bottom line is that Jerome Powell indicated a new stance from the Fed that’s far more hawkish. The Fed is now more cautious and worried about inflation, which markets are betting will create headwinds in 2025.

The reaction to today’s FOMC is now worse than November 2022, when the S&P 500 fell more than 2%.

The S&P 500 is down 2.69%, the Dow Jones Industrial Average 2.12%, and the Nasdaq 3.39%

Most Stocks Now Red

2:53 pm

As of 2:50 p.m., just five Dow stocks are in the green while just 53 out of 500 S&P 500 stocks are positive. A few notes on why markets are reacting this way:

• Fed Chair Jerome Powell said today’s 25 basis point cut was a “closer call” than expected.
• He’s also emphasizing added cautiousness while the Fed monitors 2025 policy decisions such as the impacts of tariffs on imported goods.

As of 3 p.m. ET, the Nasdaq is now down 1.56%, the S&P 500 down 1.32%, and the Dow Jones Industrial Average down 1.14%.

Selling Accelerates

2:49 pm

As of 2:50 p.m. ET, markets now stand at:

• Nasdaq-100: Down 1.13%
• S&P 500: Down .99%
• Dow Jones: Down .89%

 

Markets Bounce Around in Powell Press Conference

2:35 pm

Powell is currently speaking and markets are bouncing around. Powell noted that policymaker projections for rates are higher next year, which implies members are becoming more concerned about rising inflation.

However, Powell noted that inflation is “broadly on track.”

As of 2:40 p.m. ET, the Nasdaq is down .78% while the S&P 500 is down .69%.

Market Sink After Fed Statement

2:15 pm

The Federal Open Market Committee cut the borrowing rate in line with expectations, a 25 basis point cut to 4.25% to 4.50%.

However, a slight language tweak in the post-meeting statement has investors on edge as it could point toward the Fed cutting less aggressively in 2025. We’ll continue updating news on the Fed’s decision as Fed Chair Jerome Powell will be speaking at a press conference shortly.

How Has the Market Performed on Federal Open Market Committee Days?

11:21 am

Before the Federal Reserve makes its decision today, let’s look at stock market performance on past decisions,

• November (Cut by 25 basis points): +.77%
• September (Cut by 50 basis points): -.34%
• July (No Change to Rates): +1.63%

The last very significant downward movement came in January of 2024 when the market dropped 1.63% the day of the Fed’s rate decision.

As of 10:35 a.m. ET, markets are slightly in the green this morning. Checking in on major indexes:

• Nasdaq: +29.91 (+.15%)
• S&P 500: +13.69 (+.23%)
• Dow Jones Industrial Average: +215.43 (+.50%)

The big news most financial media is focusing on today is whether the Dow Jones can break its 9-day losing streak that’s the longest since the 1970s. It’s important to note that while the Dow has been down this many days in a row, it’s down less than 4% across that span. So while the losing streak is an impressive number of days, the total size of the Dow’s drop isn’t especially notable.

Whether the Dow breaks the streak will likely depend on comments later today from Federal Reserve Chair Jerome Powell. Let’s dive deeper into today’s largest stories.

Federal Reserve Decision Incoming

The big news that will drive markets today is commentary from Federal Reserve Chair Jerome Powell. The Fed is widely expected to cut rates by .25%, or 25 basis points. If the Fed were to not cut rates, it’s likely the market would see an immediate and severe drop.

However, if the Fed does cut rates, a reaction will largely depend on commentary around future outlook. There are two main areas the market will focus on: the first is Jerome Powell’s press conference and the second is a Summary of Economic Projections that gives further insight into what the Fed is planning in the year to come.

If Powell indicates the Fed will be more cautious in the year ahead, stocks will likely drop. The Fed’s decision is released at 2:00 p.m. with Powell’s press conference to follow.

NVIDIA Rebounds After Losing Streak

Shares of NVIDIA (Nasdaq: NVDA) have been selling off in recent weeks. The company reached $152.89 in November, but closed yesterday trading for $130.39. Why is NVIDIA falling?

There are a number of possible reasons. First, there has been concern that ‘scaling laws’ around pretraining data for artificial intelligence are weakening. Over the long-term, this could lead to changes in the amount of artificial intelligence spend or change what types of chips are most in demand. For example, while NVIDIA’s stock has been falling, the stocks of rivals like Broadcom (Nasdaq: AVGO) and Marvell (Nasdaq: MRVL) have been surging.

Both stocks build custom chips that could see more benefits if artificial intelligence computing needs shift to areas like ‘inference.’ It’s unclear why NVIDIA is rallying today, but shares are rallying today. Wall Street bank Citi reiterated a $175 price target while reiterating that NVIDIA and Broadcom can coexist and that increasing capacity of CoWos from Taiwan Semiconductor should alleviate future bottlenecks of NVIDIA’s chips.

NVIDIA shares are up 3.6% in morning trading.