US Equities Decline as Federal Reserve Signals Fewer Rate Cuts
US equities plummeted on Wednesday as the Federal Reserve reduced interest rates by 25 basis points, setting the target range at 4.25%-4.5%. However, projections for fewer rate cuts in 2025 led to a broad market sell-off. The Nasdaq Composite fell 3.7%, the S&P 500 declined 2.9%, and the Dow Jones dropped 1,123 points, marking its 10th consecutive day of losses, the longest streak since 1974.
Treasury yields soared, with the 10-year yield reaching 4.51%, as the Fed projected only two rate cuts in 2025 instead of the previously anticipated four. Updated forecasts also included lower unemployment rates, higher core inflation, and stronger economic growth expectations. All sectors closed in negative territory, with consumer discretionary leading losses, down 4.7%.
Powell’s Remarks and Market Implications
Federal Reserve Chair Jerome Powell emphasized that monetary policy is now less restrictive, further dampening investor sentiment. Rising bond yields pressured equity valuations, while semiconductor and healthcare stocks, which initially gained, reversed course. Nvidia slipped 1.1%, and UnitedHealth recovered 2.9% after previous losses. The hawkish tone in the Fed’s projections heightened concerns over tighter financial conditions and their potential impact on future economic growth.
Global Market Updates
Asian Equities React
Asian equities experienced sharp declines on Thursday as markets reacted to the Federal Reserve’s slower pace of expected interest rate cuts in 2025. South Korea’s KOSPI dropped 1.7%, weighed down by chipmakers such as SK Hynix and Samsung. Japan’s Nikkei 225 and TOPIX indices reduced earlier losses after the Bank of Japan held rates steady, providing support for export-oriented sectors amid a weaker yen.
European Markets Edge Higher
In contrast, European equities edged higher on Wednesday. The Eurozone’s Stoxx 50 rose 0.3% to 4,960 as investors awaited the Federal Reserve’s rate decision. Notable performers included ASML, up 2.2% amid chip sector volatility, UniCredit, which gained over 2% after increasing its Commerzbank stake, and Renault, which surged 5.6% following reports of a potential Nissan-Honda merger.
Currency and Commodity Market Developments
The US dollar maintained its strength, trading near its highest level since November 2022, buoyed by the Federal Reserve’s cautious stance on future rate cuts and stronger economic projections. Meanwhile, the euro weakened to 1.0377 against the dollar, reflecting diverging monetary policies.
Bitcoin fell below the $100,000 mark on Thursday, retreating from recent all-time highs. The decline followed the Federal Reserve’s hawkish guidance for fewer rate cuts in 2025 and comments from Chair Powell clarifying that the central bank cannot hold digital currencies under current regulations.
Oil prices declined during Asian trading on Thursday, pressured by a stronger dollar and concerns over slower global economic growth. However, crude remained supported by hopes of increased fiscal stimulus in China and tighter supplies from extended OPEC+ production cuts.
Equities on the Move
Micron Technology Forecast Sparks Selloff
Micron Technology shares tumbled 16% in after-hours trading on Wednesday after the company projected weaker-than-expected revenue and profits due to soft demand for consumer products. Concerns about sluggish demand in key sectors, including PCs, smartphones, and automobiles, further dampened the outlook.
UniCredit Nears Mandatory Takeover Threshold
UniCredit increased its stake in Commerzbank to 28%, approaching the 30% threshold that would trigger a mandatory takeover bid under German law. This move underscores UniCredit’s interest in expanding its presence in Germany despite political resistance and potential delays.
Amazon Faces Strike Threats
Amazon is under mounting pressure to negotiate with the Teamsters Union, as workers at multiple US facilities voted to authorize a strike. The potential walkout threatens to disrupt the retailer’s holiday operations. Amazon has resisted bargaining, fearing it could encourage further unionization efforts.
Novo Nordisk Faces Regulatory Scrutiny
The European Medicines Agency is reviewing studies linking Novo Nordisk’s diabetes drug Ozempic to a rare eye condition that may cause vision loss. While no direct causation has been established, Novo Nordisk stated that the benefit-risk profile of semaglutide, also marketed as Wegovy, remains unchanged.
Siemens Plans Divestments
Siemens announced plans to sell a $2.6 billion stake in Siemens Energy to help finance its $10 billion acquisition of Altair Engineering. The company also intends to divest its entire holding in Siemens Energy and is considering selling a portion of its stake in Siemens Healthineers.
Visa Named Top Pick
Morgan Stanley named Visa its top choice in the payments sector for 2025, citing growth opportunities from international travel, value-added services, and reduced regulatory risks. The brokerage highlighted Visa’s attractive valuation and potential for double-digit earnings growth.
Rivian Price Target Cut
Baird reduced its price target for Rivian to $16, citing limited catalysts, weaker EV demand, and near-term growth concerns after missed Q3 results. While the firm remains positive on Rivian’s long-term prospects, it expects weaker EV sales to weigh on shares.
Key Data and Events
Today in the US, key reports include the third estimate for Q3 GDP, November existing home sales, and leading indicators. Additionally, corporate earnings from FedEx and Nike are anticipated, along with the Bank of England’s latest monetary policy decision.
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